Emerging-Market Stocks Rise From One-Year Low on China
Emerging-market stocks rebounded from the lowest level in a year and bond yields fell as China’s central bank said it will ensure market stability. Brazil’s Ibovespa jumped while Turkey’s lira snapped a six-day plunge.
The MSCI Emerging Markets Index rose 0.3 percent to 885.85. The Shanghai Composite Index pared a decline of as much as 5.8 percent, while Usinas Siderurgicas de Minas Gerais SA led Brazilian steelmakers higher. The lira rose from a record low, while Russia’s 2030 Eurobond yield tumbled from an 18-month high. The premium investors demand to own emerging-market debt over U.S. Treasuries slumped, according to JPMorgan Chase & Co.
China’s central bank said it will use tools to safeguard stability in money markets and tight liquidity is set to ease, in a sign of relief for a cash squeeze in the world’s second-largest economy. Today, the nation’s stocks posted the biggest swings in 22 months. Emerging-market shares also gained after better-than-forecast reports on American durable-goods orders, housing and consumer confidence.
“It’s encouraging that the government is recognizing those risks and taking proactive steps to return to normalcy,” Alan Gayle, senior strategist at RidgeWorth Capital Management, said by phone from Atlanta. His firm oversees about $48 billion. “What is also encouraging for emerging markets is the data out of the U.S. this morning.”
Mark Mobius, who oversees $53 billion in emerging markets, said he has confidence in China’s central bank and is keeping his overweight position following a five-day tumble.
“We should be confident about what the government is doing and they are cleaning up the system,” Mobius, the executive chairman of Templeton Emerging Markets Group, said in a phone interview today from Monaco. “We are looking to add to Chinese exposure if the price is right. If the price comes down substantially, we would.”
Eight out of 10 groups in the MSCI Emerging Markets Index rose today as consumer-staple and energy shares had the biggest gains. The measure, which has fallen 12 percent this month, is trading at 9.2 times estimated earnings, according to data compiled by Bloomberg. Shares in the MSCI World Index of developed markets are valued at 12.9 times projected profits.
The iShares MSCI Emerging Markets Index exchange-traded fund rose 2.1 percent to $37.43. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, lost 15 percent to 32.35.
Brazil’s Ibovespa (IBOV) rose after the biggest two-day drop since July 2012 as Usiminas, as Usinas Siderurgicas is known, gained 10 percent. The real climbed a third day as the government reported stronger budget figures than economists forecast.
Russian equities rose from the lowest in a week as OAO Gazprom, the nation’s biggest company, climbed and crude oil advanced. The yield on Russia’s Eurobonds due March 2030 sank after climbing to the highest since December 2011 yesterday.
Benchmark stock gauges in South Africa (JALSH), Turkey and Poland gained, while stocks in the Czech Republic retreated. The Turkish lira snapped a six-day losing streak.
The Shanghai Composite lost 0.2 percent, after fluctuating 114 points between its high and low, the biggest intraday swing since August 2011. The CSI 300 Index (SHSZ300), which entered a bear market yesterday slipped 0.3 percent. Ping An Bank Co. led a gauge of financial shares to its biggest two-day rout since August 2009. The Hang Seng China Enterprises Index of mainland companies slid 0.8 percent after yesterday falling to its lowest since October 2011.
The Philippine Stock Exchange Index (PCOMP) tumbled 3.1 percent, entering a bear market, amid the biggest monthly foreign sell-off on record. The peso rose as the central bank said it’s not considering measures to curb outflows.
India’s rupee held at yesterday’s record closing low as a slowdown in inflows leaves the currency vulnerable to a current-account deficit. The S&P BSE Sensex (SENSEX) rose, led by energy companies and consumer goods makers, as some investors bet the drop to a 10-week low was excessive.
The extra yield for emerging-market debt over U.S. Treasuries lost 12 basis points to 363 basis points, according to JPMorgan’s EMBI Global Diversified Index.