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 increased 0.8 percent to 1,006.60 by 5:41 p.m. in New York, trimming this week’s loss to 0.7 percent. India’s benchmark gauge jumped to a one-year high and the rupee rallied on tax cuts that added to policy reforms last week. Markets in Chile, Turkey and South Korea also gained. Russia’s ruble snapped a four-day decline as oil pared its biggest weekly drop in three months. 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, Cambridge, Massachusetts-based EPFR said in an e-mail. 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 0.2 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 5.3 percent.
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 Bovespa slipped 0.6 percent amid concern stimulus measures in the U.S. and Europe might not be enough to boost a Brazilian recovery, dimming the outlook for the country’s raw-material exports. Petroleo Brasileiro SA, Brazil’s state-controlled oil company and Vale SA, the world’s biggest iron-ore producer, fell by one percent or more.
Stock funds attracted $17 billion in the week ended Sept. 19, while about $3.2 billion was invested in emerging funds, EPFR Global said.
The ruble gained 0.7 percent against the dollar and the rand strengthened 0.3 percent. The Standard & Poor’s GSCI gauge of 24 raw materials climbed 0.9 percent. Oil jumped 1.1 percent to $92.89 a barrel on the New York Mercantile Exchange, 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 6.3 percent this month, beating a 4.6 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 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’s biggest member, fell 2.5 percent for the week, the most this month.
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.