Emerging Stocks Gain for Sixth Day as Fed Extends Easing Steps
Emerging-market stocks increased for a sixth day, the longest stretch of gains this year, after the Federal Reserve unveiled new easing measures to boost growth and reduce unemployment.
The MSCI Emerging Markets Index (MXEF) added 0.4 percent to 982, rising to a four-month high. Brazil’s Bovespa stock index (VXEEM) surged 3.4 percent, led by Usinas Siderurgicas de Minas Gerais SA, the country’s second-biggest steelmaker. Equities gauges in South Africa and Argentina gained. The Shanghai Composite Index retreated 0.8 percent, the most in two weeks.
The Fed will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month in a third round of quantitative easing, the Federal Open Market Committee said in a statement at the end of a two-day meeting in Washington. China’s central bank issued 28-day reverse-repurchase contracts for the first time in a decade, a temporary measure to boost liquidity in the financial system.
Emerging-market stocks are “gaining on this news, especially seen in the context of central banks around the world announcing easing measures,” Alec Young, a New York-based global equity strategist at S&P Capital IQ, said by phone.
The FOMC also said it would likely hold the federal funds rate near zero “at least through mid-2015.” The rate was likely to stay low at least through late 2014, the central bank had said earlier in the year.
EM ETF Gains
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM) tracking developing-nation shares, increased 2.7 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, declined 4.4 percent.
Brazil’s benchmark equity index gained for a sixth day for its longest winning streak in seven months, with Usiminas jumping 13 percent and online retailer B2W Cia. Global do Varejo gaining 8.5 percent.
South Africa’s FTSE/JSE Africa All Share Index gained 0.4 percent. Egypt’s EGX 30 Index sank 1.1 percent, the most since July 25.
The MSCI emerging-market gauge has climbed 7.2 percent this year, trailing a 12 percent gain in the MSCI World Index (MXWO) of developed-country shares. The emerging-nation gauge rallied the past six days as European policy makers announced a bond- purchase program and China’s top planning agency approved proposals to build rail, roads and urban infrastructure.
The extra yield investors demand to own emerging-market bonds over U.S. Treasuries rose 3 basis points to 294, according to JPMorgan Chase & Co.’s EMBI Global Index.
South Korea’s government bonds tumbled after the central bank left interest rates unchanged, bucking estimates for a 25 basis-point reduction. The yield on 3.25 percent bonds due June 2015 climbed seven basis points to 2.88 percent, Korea Exchange Inc. prices show.
Agricultural Bank of China Ltd. and Bank of Communications Co. dropped 1.4 percent in Hong Kong trading.
“The extension of the tenor of reverse repos suggests that policy makers are continuing to favor temporary measures over cutting the required reserve ratio, which would be a permanent solution,” Dariusz Kowalczyk, a senior strategist at Credit Agricole in Hong Kong, wrote in a report today. “This means that interbank liquidity will likely remain relatively tight.”
India’s rupee weakened 0.3 percent against the dollar after HSBC Holdings Plc cut its forecast for the nation’s economic growth in the year through March 2013 to 5.7 percent from 6.2 percent.
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