Emerging Stocks Rebound on Cyprus as Cemig Sinks Bovespa
Emerging-market stocks rose for the first time in eight days as Europe weighed options for Cyprus’s bailout and the Federal Reserve said it would maintain the current pace of bond purchases. Brazilian shares slid.
VTB Group, Russia’s second-biggest bank which has a Cypriot unit, rebounded from a three-month low, an Hungarian lender OTP Bank Nyrt. (OTP) jumped. Mirae Asset Securities Co. (037620) fell a third day in Seoul as a cyberattack shut down some computer networks. Brazil’s Bovespa index fell to a two-week low as utility Cia. Energetica de Minas Gerais plunged. China’s Shanghai Composite (SHCOMP) Index surged the most among Asian bourses.
The MSCI Emerging Markets Index (MXEF) gained 0.1 percent to 1,026.35, rising from a three-month low. Investors speculated that the European Central Bank will continue to support Cypriot banks until next week after lawmakers rejected an unprecedented levy on bank deposits. The Fed will continue buying $85 billion of bonds a month to bolster the U.S. economy, the Federal Open Market Commitee said today after meeting in Washington.
“The panic is abating and investors are moving back to riskier assets such as emerging-market equities,” Joseph Dayan, head of markets at BCS Financial Group in London, said by e- mail. “Investors fairly quickly realized that Cyprus in not a precedent for other peripheral European countries and that deposits in mainstream financial systems remain off limits.”
A measure of financial stocks in the developing-nations index rose, while technology companies fell. The broader emerging-market gauge has slipped 2.7 percent this year, trailing a 7.2 percent gain in the MSCI World Index (MXWO) of developed-country stocks. The emerging-markets measure trades at 10.8 times 12-month projected profit, compared with the MSCI World’s 14.2 valuation, data compiled by Bloomberg show.
The iShares MSCI Emerging Markets Index exchange-traded fund rose 0.6 percent to $42.23, the first gain in four days. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a gauge of options prices on the fund and expectations of price swings, slumped 5.3 percent to 18.09.
The Shanghai Composite gauge of domestic Chinese stocks climbed 2.7 percent after Market Studies LLC’s Tom DeMark, who corectly predicted a retreat in the index last month, said that stocks will rally as much as 28 percent by September.
Brazil’s Bovespa index fell 0.6 percent as Cemig plunged 14 percent, leading utilities lower on concern regulators will limit rate increases. The IPC Index gained 1 percent in Mexico City as homebuilder Urbi Desarrollos Urbanos SAB (URBI*) snapped eight days of losses.
Russia’s Micex Index gained 0.7 percent, rallying for the first time in four days. VTB jumped 1.8 percent after the company said it may lose “only tens of millions of euros” in Cyprus as a worst-case scenario. The ruble strengthened 0.4 percent versus the dollar. The Market Vectors Russia ETF (RSX) jumped 1.1 percent in New York, rebounding from the lowest level since Nov. 28.
Hungary’s BUX Index added 1.7 percent, climbing for the first time in seven days, as OTP Bank rallied 3.3 percent. The forint strengthened for a second day versus the euro. Hungary plans no “dramatic” measures to help foreign-currency borrowers, Daniel Gyuris, the acting head of the Hungarian Banking Association, said by phone yesterday.
India’s S&P BSE Sensex dropped 0.7 percent, falling for a fourth day amid concern the withdrawal of the government’s biggest partner from the ruling alliance may jeopardize economic reforms.
South Korea’s Kospi Index retreated 1 percent, the most since Jan. 15, with about half the slump occurring in the last 20 minutes of trading. The government is investigating a cyberattack that shut down computer networks for banks and broadcasters. Mirae Asset tumbled 5.1 percent.
The won lost as much as 0.8 percent against the dollar after the government said it will consider steps to curb capital flows.
The extra yield investors demand to own developing-nation dollar debt over U.S. Treasuries fell seven basis points, or 0.07 percentage point, to 293 basis points, according to the JPMorgan Chase & Co. EMBI Global Index.
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