Emerging Stocks Advance to One-Month High on Chinese GDP
Emerging-market stocks rose to the highest level in almost a month as China’s economic growth met forecasts and the nation boosted foreign investor access to its markets. Turkey’s lira climbed as the central bank said it may raise interest rates this month to bolster the currency.
The MSCI Emerging Markets Index rose 0.7 percent to 952.23, the highest close since June 18. BYD Co., a Chinese maker of electric cars partly owned by Warren Buffett’s Berkshire Hathaway Inc., surged in Hong Kong as the government announced a plan to promote the use of energy-saving automobiles. Brazil’s Ibovespa (IBOV) gained the most since March as homebuilders climbed after traders pared bets on interest-rate increases. The lira rose as much as 1.2 percent against the U.S. dollar.
China’s economy grew 7.5 percent in the second quarter, easing concerns that growth would fall below official forecasts after Finance Minister Lou Jiwei said last week that 6.5 percent expansion wouldn’t be a “big problem.” A measured step to widen Turkey’s interest-rate corridor will be on the agenda of the next Monetary Policy Committee meeting on July 23, Governor Erdem Basci said in a statement on the central bank’s website.
“The Chinese GDP report came in right on expectations,” said James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, who helps oversee more than $340 billion of assets. “That was a relief.”
The iShares MSCI Emerging Markets Index exchange-traded fund rose 1 percent to $39.34. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slid 4 percent to 26.21.
All 10 groups in the MSCI Emerging Markets Index rose, led by consumer and commodity shares. The broad measure has slumped 9.8 percent this year, compared with a 12 percent jump in the MSCI World Index. The developing-nation gauge trades at 10 times projected earnings, lower than the MSCI World’s valuation of 13.8, according to data compiled by Bloomberg.
The outlook for high-yielding emerging market currencies in Latin America and Europe, the Middle East and Africa is more constructive, Bernd Berg, an emerging-markets strategist at Credit Suisse Group AG in Zurich, wrote in a note. He cited potential Chinese growth stabilization, an improvement in economic momentum in developing nations and expectations the “Fed tapering is now priced in,” he wrote, referring to the potential for the Federal Reserve to reduce stimulus.
Brazil’s Ibovespa added 2.6 percent as MRV Engenharia e Participacoes SA led gains in real-estate shares. Companies owned by billionaire Eike Batista, including oil producer OGX Petroleo & Gas Participacoes SA and miner MMX Mineracao e Metalicos SA, surged. The start of trading was delayed by 18 minutes today due to technical problems in BM&FBovespa’s trading platform, the exchange said in a statement.
The real rallied the most among major emerging-market currencies as Credit Suisse and Nomura Holdings Inc. forecast it will strengthen.
Russian shares climbed for a third day as OAO Sberbank, the country’s biggest lender, rose after the central bank eased borrowing costs. The Borsa Istanbul Stock Exchange National 100 (XU100) Index jumped 3.1 percent. Hungary’s and Poland benchmark stock indexes gained and shares in the Czech Republic retreated.
The Shanghai Composite Index rose 1 percent, extending last week’s gains. Citic Securities Co. and Haitong Securities Co. climbed 4 percent after regulators almost doubled qualified foreign institutional investment quotas to $150 billion. BYD gained 11 percent. Tencent Holdings Ltd. (700), China’s biggest Internet company, led technology stocks higher in Hong Kong trading after the central government announced plans to boost the telecommunications industry.
Indian stocks advanced for a third day as the country’s benchmark inflation rate climbed less than forecast, outweighing an unexpected decline in the industrial output. State Bank of India, the nation’s biggest lender by assets, climbed 1 percent. The rupee lost 0.4 percent to 59.8950 per dollar, the biggest drop since July 8.
Indonesia’s rupiah weakened beyond 10,000 per dollar for the first time since September 2009 as slowing economic growth in China dimmed the outlook for exports and the current-account deficit. Government bonds declined.
The premium investors demand to own emerging-market debt over U.S. Treasuries lost 0.01 percentage point to 330 basis points, according to JPMorgan Chase & Co.