Emerging Stocks Halt Two-Day Decline as Materials Shares Advance
Emerging-market stocks rose for the first time in three days, led by Brazilian shares, after higher commodities prices lifted producers. South Korean shipbuilders jumped, while Poland’s zloty paced a rally in currencies.
Harmony Gold Mining Co. and Gold Fields Ltd. advanced more than 7 percent in Johannesburg as bullion reached a one-month high. Brazil’s Ibovespa gained as miner MMX Mineracao e Metalicos SA gained. Hyundai Heavy Industries Co. (009540) rose to the highest since April in Seoul after LIG Investment & Securities Co. said the industry outlook will improve. Industrial & Commercial Bank of China Ltd. fell in Hong Kong following a move by Chinese policy makers to scrap a floor on lending rates.
The MSCI Emerging Markets Index added 0.4 percent to 954. The gauge has risen 5.3 percent in the past two weeks as concerns eased that the U.S. Federal Reserve will pare monetary stimulus. The People’s Bank of China is ending a lower limit on borrowing costs while keeping a cap on deposit rates, it said July 19, raising speculation looser interest-rate controls will benefit smaller companies and hurt banks’ margins.
“We had oversold positions in a lot of things related to emerging markets,” Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama, said by phone. “There are still concerns about global growth, but we see some of the commodities up, the dollar is a little bit weaker. The rally could last several days.”
A gauge of raw-material producers rose 1.2 percent, leading gains among 10 industry groups. Harmony Gold climbed 8.9 percent and Gold Fields jumped 7.2 percent. The FTSE/JSE Africa All Shares Index advanced 0.9 percent.
Gold climbed 3.3 percent and copper gained 1.4 percent, leading industrial metals higher. A report today showed sales of previously owned U.S. houses unexpectedly dropped in June, hurt by a lack of supply and rising mortgage rates.
KGHM Polska Miedz SA, Poland sole copper producer, advanced for a second day, gaining 0.7 percent. Russia’s Micex Index slipped 0.4 percent.
The iShares MSCI Emerging Markets Index exchange-traded fund climbed 1 percent to $39.67. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, dropped 6.1 percent to 23.19.
Brazil’s Ibovespa rose 2.5 percent, the most among major equity gauges. MMX jumped 9.6 percent, while iron ore producer Vale SA climbed 1.9 percent to a one-month high. Phone company Oi SA surged 16 percent, leading advances on the MSCI gauge.
The IPC Index climbed 0.6 percent in Mexico City as mining company Industrias Penoles SAB rose 2.2 percent, snapping three days of losses.
The Hungarian forint gained 0.9 percent against the dollar before Hungary’s central bank rate decision tomorrow, leading gains among emerging market currencies along with the Polish zloty.
The MSCI Emerging Markets gauge has lost 9.6 percent this year and trades at about 10 times its 12-month projected earnings. The MSCI World Index of developed nations has increased 14 percent in 2013 and trades at 13.9 times, according to data compiled by Bloomberg.
While the Fed has sent a message that markets should not be “overly fearful” of tapering, better data is needed from China to support a more sustained recovery in emerging-market stocks, Christian Keller, the head of emerging-market research at Barclays Plc in London, said by e-mail.
“In general, there is little data that would actually support a significant sentiment shift in favor of EM equities,” he said.
Pacific Investment Management Co.’s Bill Gross said he expects the Fed won’t tighten monetary policy until 2016 at the earliest.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell two basis points, or 0.02 percentage point, to 309 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.
Hyundai Heavy surged the most since May 9 while Daewoo Shipbuilding & Marine Engineering Co. (042660) rose 3.1 percent to the highest level in four months. The outlook for South Korean shipbuilders will improve in the second half as prices for new vessels increase, LIG Investment said in a report. The country’s Kospi index added 0.5 percent.
The Shanghai Composite Index (SHCOMP) added 0.6 percent, its first gain in four days. The Hang Seng China Enterprises Index (HSCEI) of mainland companies traded in Hong Kong fell 0.4 percent. China Minsheng Banking (600016) Corp. fell to a two-week low as Moody’s Investors Service said it will face increased competition for loans to small and medium enterprises.
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