Emerging Stocks Rise to One-Month High on Stimulus Bets
Emerging-market stocks rose to a one-month high after Chinese Premier Wen Jiabao said the nation has room to boost stimulus and a German court paved the way for a permanent rescue fund to combat Europe’s debt crisis.
The MSCI Emerging Markets Index (MXEF) increased 0.6 percent to 978.48 at 5:04 p.m. in New York, climbing for a fifth day. Brazil’s Bovespa Index added 0.8 percent as steelmaker Usinas Siderurgicas de Minas Gerais SA climbed to a four-month high. Taiwan’s TPK Holding Co. (3673) gained the most in three months. Equity gauges in South Korea, South Africa (JALSH) and the Czech Republic increased.
China still has “ample strength” to use monetary or fiscal policy to boost growth in the biggest emerging economy, Wen said yesterday. Germany’s top constitutional court rejected bids to halt the nation’s ratification of the 500 billion-euro ($644 billion) rescue fund today. The U.S. Federal Reserve begins a two-day policy meeting today amid speculation policy makers will announce a third round of asset purchases to boost the economy.
“Wen Jiabao’s comments together with last week’s infrastructure announcements have been very good for investor sentiment toward emerging markets,” Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion, said in a phone interview. “The major central banks have been worried that the slowing has been more than anticipated, so they’re stepping up efforts to resuscitate economic activity before they lose the ability to do so in a swift manner.”
The 21 countries in MSCI Inc.’s developing-nations gauge send about 13 percent of their exports to the U.S. and 30 percent to the European Union, according to data compiled by the World Trade Organization.
The index extended this year’s gain to 6.8 percent, and its five-day stretch of gains is the longest in a month. The MSCI World Index of advanced-nation shares has gained 11 percent this year.
The Hang Seng China Enterprises Index (HSCEI) advanced for the first time in three days, rising 1.2 percent. South Korea’s Kospi Index (KOSPI) increased 1.6 percent and South Africa’s FTSE/JSE Africa All Shares Index added 0.8 percent. The Czech PX index gained 1.1 percent. The ruble strengthened 0.2 percent against the dollar.
The extra yield investors demand to own emerging-market bonds over U.S. Treasuries declined five basis points to 291, according to JPMorgan Chase & Co.’s EMBI Global Index.
Germany’s Federal Constitutional Court dismissed motions filed by groups including a conservative lawmaker and an opposition political party that sought to block the rescue fund, known as the European Stability Mechanism, and a deficit-control treaty championed by Chancellor Angela Merkel.
The court stipulated that a cap of about 190 billion euros be set on German liabilities before ESM ratification, unless parliament decides to back extra funds.
Usiminas, as the Brazilian steelmaker is known, advanced to the highest since May and Vale SA (VALE3), the world’s biggest iron-ore producer, increased 0.7 percent in Sao Paulo. Oil producer Petroleo Brasileiro SA (PETR4) climbed 1.2 percent after Chief Executive Officer Maria das Gracas Foster said the company is “anxious” to bid on new licenses.
TPK Holding jumped 7 percent to the highest since October. Desarrolladora Homex SAB (HOMEX*), Mexico’s largest homebuilder, rose for a sixth day, the longest winning streak since February.
Anhui Conch Cement Co. (914), China’s biggest supplier of cement, jumped 4.8 percent in Hong Kong, leading a rally in construction-related companies. China Coal Energy Co. (1898), the nation’s second-largest coal producer, rose 2.4 percent.
“Be it monetary or fiscal, we still have ample strength,” Wen said at the World Economic Forum in Tianjin yesterday. A fiscal stabilization fund of 100 billion yuan ($16 billion) is available for “preemptive” measures, he said.
Morgan Stanley today became at least the fifth bank to estimate that China’s economic growth this year will be 7.5 percent, the same as Wen’s target and the weakest pace in 22 years, after imports slid in August and industrial production cooled.
Hon Hai Precision Industry Co. (2317) paced gains among Apple Inc. suppliers as the world’s largest company by market value unveiled its new iPhone at an event in San Francisco today. Hon Hai (AAPL), the world’s largest contract manufacturer of electronics, rose 2.9 percent to the highest level since April 26.
AirAsia (AIRA) Bhd., Asia’s biggest discount airline, tumbled 5.3 percent in Kuala Lumpur, the most since November. Malindo Airways, backed by Indonesia’s PT Lion Mentari Airlines, will sell tickets at prices matching “or maybe lower” than AirAsia’s, the company said yesterday.
Anglo American Platinum Ltd. (AMS), the largest producer of the metal, declined 4 percent in Johannesburg. The company said it diverted employees at its Rustenburg operations away from the mine after unidentified people prevented some workers from entering shafts last night.
South Africa’s rand weakened 1.8 percent against the dollar for the biggest decline among emerging-market currencies.
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