Emerging-Market Equities Rebound After Valuations Slump
Emerging-market stocks advanced, led by Brazilian and Indian equities, after valuations reached the lowest level versus developed markets since 2005 and falling energy prices boosted transportation companies.
ICICI Bank Ltd. (ICICIBC), India’s biggest private lender, reached a one month-high and the rupee gained on speculation yesterday’s oil and gold price declines will spur the central bank to cut interest rates. China Southern Airlines Co. rose the most since Feb. 20 as oil fell, while Eike Batista’s MMX Mineracao & Metalicos SA jumped in Sao Paulo. Turkish bond yields slid to a record low after a larger-than-expected interest rate cut.
The MSCI Emerging Markets Index added 0.6 percent to 1,008.92 in New York, after slumping the most since July yesterday. The decline drove the index down to 1.5 times net assets, compared with 1.9 for the MSCI World Index, the biggest gap since August 2005, according to data compiled by Bloomberg. Brent crude dropped below $100 a barrel for the first time since July as West Texas Intermediate oil was little changed.
“There’s a case to be made for a little bit faster growth and very cheap valuations on the emerging market space,” Jeff Papp, a senior analyst at Oberweis Asset Management Inc., which manages about $700 million of investments, said by phone from Lisle, Illinois. “Some people are saying ’the U.S. markets have had a great run, let’s look for some laggards.’ Emerging markets are one place you may find them.”
Nine out of 10 groups in the developing-nations gauge rose today as healthcare shares had the biggest gain. The emerging- markets index has lost 4.4 percent this year as government intervention in the biggest developing nations curbed profits and economic growth slowed from South Korea to Poland. The MSCI World Index has gained 7.5 percent.
Stocks also joined gains in the U.S. after data showed that new-home construction jumped more than forecast in March. The iShares MSCI Emerging Markets Index (MXEF) exchange-traded fund climbed 2.1 percent to $41.70 in New York. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slumped 8.7 percent to 20.09.
Brazil’s Bovespa index rebounded from its biggest slump since 2011, adding 2 percent, as MMX rose 9.3 percent. Mexico’s IPC Index snapped a two-day drop. Urbi Desarrollos Urbanos SAB shares and bonds plunged as the Mexican homebuilder faces complaints from Barclays Plc and Credit Suisse Group AG that it failed to make payments on derivatives contracts.
Venezuelan bonds fell the most in 15 years as seven people died in street protests demanding a vote recount of President- elect Nicolas Maduro’s victory, adding to concern that instability will undermine the economy.
Russian stocks fell a fourth day as OAO LSR Group, a property developer, slid 1.1 percent after Citigroup Inc. cut its estimate for global depositary receipts. Turkey’s Borsa Istanbul Stock Exchange National 100 Index had its first drop in four days. Poland stock market was closed as the Warsaw Stock Exchange switched to NYSE Euronext’s new trading system.
India’s S&P BSE Sensex surged 2.1 percent, the biggest one- day gain since Sept. 21. ICICI Bank advanced 3 percent in its sixth day of gains.
China’s stocks rebounded from a three-month low, as property shares jumped on speculation the government won’t impose any more real-estate curbs as growth slows and lower oil boosted airlines. The Hang Seng China Enterprises Index retreated 0.1 percent. China Southern Airlines (1055), the country’s biggest domestic carrier, jumped 4.1 percent.
South Korea’s Kospi Index gained 0.1 percent, while the Bank of New York Mellon Korea ADR Index jumped 3.4 percent in New York, the biggest gain since June 29.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 291 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.