Emerging Stocks Rise on Spain Aid Report; Rupee Jumps on Tax Cut
Emerging-market stocks rose, paring the first weekly decline this month, as a report saying European officials will unveil a bailout plan for Spain fueled demand for commodity producers.
The MSCI Emerging Markets Index (VXEEM) increased 0.9 percent to 1,007.68 by 11:10 a.m. in New York, trimming this week’s loss to 0.6 percent. Brazil’s Bovespa stock index rose for a second day. Russia’s ruble snapped a four-day decline as oil pared its biggest weekly drop in three months. India’s benchmark gauge jumped to a one-year high and the rupee rallied on tax cuts that added to policy reforms last week. Samsung Electronics Co. (005930) gained 1.2 percent in Seoul.
Global equity funds lured the largest weekly inflows this year after the Federal Reserve and the European Central Bank announced plans to buy bonds to support growth, according to Citigroup Inc. Spanish Economy Minister Luis de Guindos is in talks with European Commission authorities to facilitate a new bailout program, the Financial Times reported, citing unidentified officials involved in the discussions.
“What’s happening with Spain talking to EU introduces a positive sentiment in the market, because if Spain asks for aid, it can potentially unlock ECB action,” Sebastien Barbe, the head of emerging markets research and strategy at Credit Agricole CIB, said by phone from Paris today. “You have quite good opportunities in emerging markets and markets just want to be sure that improvements in Europe are going to be effective.”
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM) tracking developing-nation shares, increased the most this week, gaining 0.6 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slid 4.4 percent.
The Bovespa rose 0.5 percent as Petroleo Brasileiro gained 0.4 percent. Cia. de Transmissao de Energia Eletrica Paulista rose 6.4 percent. This is the second time the stock has gained more than 6 percent this week after Goldman Sachs raised the stock to buy on Sept. 17.
Stock funds attracted $17 billion in the week ended Sept. 19, while about $3.2 billion was invested in emerging funds, Citigroup analysts wrote in a report today, citing data compiled by EPFR Global.
The ruble gained 0.6 percent against the dollar and the rand strengthened 0.9 percent. The Standard & Poor’s GSCI gauge of 24 raw materials climbed 0.8 percent. Oil jumped 1.4 percent, snapping a four-day decline. Nickel, lead and zinc rose more than 0.5 percent. Russia is the world’s largest energy exporter, while metals and other commodities accounted for 45 percent of South Africa’s exports in 2011, according to government data.
MSCI’s developing-nations measure has rallied 6.4 percent this month, beating a 4.8 percent advance by the MSCI World Index of developed-country shares. The emerging-market gauge trades for 11.3 times estimated earnings, compared with the MSCI World’s average multiple of 13.5.
The BSE India Sensitive Index (SENSEX) surged 2.2 percent, its highest close since July 25, 2011. The rupee strengthened 1.7 percent against the dollar. Today’s tax cuts come after Prime Minister Manmohan Singh last week ended a 14-month freeze on diesel prices and opened retailing and aviation industries to foreign investments.
“This move by the Finance Ministry is welcomed by the market as the government is showing firm commitment in economic reform and rules out uncertainty over potential policy reversal,” Societe Generale SA strategists, including Wee-Khoon Chong in Hong Kong, wrote in an e-mailed note today.
The Hang Seng China Enterprises Index added 1 percent in Hong Kong. South Korea’s Kospi index climbed 0.6 percent.
Samsung Electronics, the world’s largest maker of televisions and mobile phones, posted its biggest gain in a week. The stock, the MSCI Emerging Markets Index (MXEF)’s biggest member, slumped 2.1 percent yesterday, the most in two weeks.
China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, gained 3.8 percent. The Baltic Dry Index, a measure of commodity shipping costs, rose 4.6 percent yesterday to its highest close since Aug. 13.