Emerging Stocks Advance Most in Six Months as Real Climbs
Emerging-market stocks rose the most in almost six months, while bond yields sank, as China’s cash crunch eased and speculation grew that the Federal Reserve will maintain stimulus. Brazil’s real gained for a fourth day.
The MSCI Emerging Markets Index climbed 1.8 percent to 901.98, the biggest rally since Jan. 2. Industrial & Commercial Bank of China Ltd., the world’s largest lender, surged 6.8 percent, while the Philippine Stock Exchange Index (PCOMP) jumped the most since 2008. The real led gains in developing-nation currencies and India’s rupee fell to a record. The premium investors demand to own emerging-market debt over U.S. Treasuries slumped, according to JPMorgan Chase & Co.
Stocks joined a global rally after a government report showed that the American economy grew less than previously calculated in the first quarter, bolstering bets the Fed will keep its bond buying program. The cost of locking in China’s interest rates slid for a fourth day, the longest run of declines since February, and money-market rates fell after the central bank pledged to ease the worst cash crunch in a decade.
“The moderate growth environment in the U.S. tends to be favorable for stocks,” Audrey Kaplan, head of international equities for Federated Investors and senior portfolio manager of the Federated InterContinental Fund. Her firm manages about $377 billion in assets. “The fundamentals of why we like emerging economies is still in place. China can turn the liquidity back on at any time.”
All 10 groups in the MSCI Emerging Markets Index rose today led by consumer, industrial and financial shares. The broad measure, which has fallen 11 percent this month, is trading at 9.4 times estimated earnings, according to data compiled by Bloomberg. Shares in the MSCI World Index of developed markets are valued at 13 times projected profits.
The iShares MSCI Emerging Markets Index exchange-traded fund rose 1.6 percent to $38.02. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, lost 12 percent to 28.52.
Brazil’s Ibovespa rose a second day as B2W Cia. Digital led retailers higher amid bets that a stronger currency will help ease inflation. The real climbed as the central bank said it will eliminate reserve requirements on short dollar positions held by local banks to support the local currency.
The Mexican IPC index surged 2.4 percent, the most since January 2012, led by construction company Empresas ICA SAB.
The Micex Index jumped 1.8 percent in Moscow as OAO Sberbank (SBER), Russia’s largest lender, advanced the most since April 30. Benchmark gauges in Hungary and the Czech Republic gained at least 1 percent, while Poland’s WIG20 Index (WIG20) was unchanged. The Borsa Istanbul Stock Exchange National 100 Index rallied 3.7 percent as banks surged.
The Hang Seng China Enterprises Index of mainland companies rose 3.3 percent, its biggest advance since Jan. 2. ICBC (1398) rallied the most since December 2011. The Shanghai Composite Index fell to the lowest level since January 2009. While money-market rates dropped after the People’s Bank of China said tight liquidity is poised to ease, a gauge of seven-day interbank funding costs is nearly double this year’s average.
India’s rupee plunged to 60.73 per dollar in Mumbai, while bonds and stocks declined. Philippine stocks rallied, sending the benchmark equities index to its biggest gain in almost five years, after valuations tumbled to a seven-month low. The gauge entered a bear market yesterday after falling more than 20 percent from a record 7,392.20 set on May 15.
The extra yield for emerging-market debt over U.S. Treasuries declined seven basis points to 358 basis points, according to JPMorgan’s EMBI Global Diversified Index.