Emerging Stocks Post Weekly Gain as India Jumps; Ruble Climbs
Emerging-market stocks posted a fourth weekly gain as Indian shares rallied on optimism the new prime minister will take steps to spur growth. The ruble jumped as Russia said it would work with Ukraine’s next president.
The S&P BSE Sensex Index rose 1.3 percent to a record as State Bank of India soared after profit exceeded estimates. China Overseas Land & Investment Ltd. (688) gained on speculation the government will ease curbs on home purchases. Thai shares sank after the army staged its 12th coup in eight decades. The Ibovespa fell after Brazilian consumer confidence declined.
The MSCI Emerging Markets Index rose 1.1 percent this week to 1,042.92. It gained 0.2 percent today. India’s strongest electoral mandate in 30 years put prime minister-in-waiting Narendra Modi in a position to pass measures to bolster the economy. President Vladimir Putin, who said this week he was easing the way for Ukraine’s May 25 vote by pulling back Russian troops, said Russia work with the new leader, even though the vote won’t meet international standards.
India’s election result “exceeded most expectations and the market has been moving on the expectation that Mr. Modi will implement positive change,” Tony Hann, head of emerging markets at Blackfriars Asset Management Ltd. in London, said by e-mail. “We have seen an improvement in Russia as hopes rise that we have passed the worst in Ukraine.”
The emerging-markets gauge has advanced 4 percent in 2014, compared with a gain of 2.4 percent for the MSCI World Index of developed-country equities.
The premium investors demand to own emerging-market debt over U.S. Treasuries rose one basis point to 281 today, according to JPMorgan Chase & Co. indexes.
The measure tracking financial stocks in the MSCI Emerging Markets Index added 0.3 percent to a six-moth high. State Bank of India surged 9.6 percent. Net income dropped 8 percent to 30.4 billion rupees ($520 million) for the three months ended in March, compared with a 28 billion-rupee average estimate from 34 analysts compiled by Bloomberg.
The Ibovespa declined 0.3 percent. Brewer AmBev SA dropped 0.8 percent as companies that depend on domestic sales sank after data released by the Getulio Vargas foundation showed Brazilian consumer confidence dropped to the lowest level in five years.
The Micex Index added 0.6 percent in Moscow. Pipemaker OAO TMK, which may benefit from OAO Gazprom’s $400 billion deal to supply gas to China, increased 6.3 percent. The ruble climbed 0.6 percent against the dollar, the biggest gain among 24 developing-country currencies tracked by Bloomberg.
“Unless something dramatic happens in Ukraine over the weekend, the Russian market might continue the growth,” Kirill Yankovskiy, director for equity sales at UralSib Capital, said by e-mail. The “rising trend” in the market was “triggered by the de-escalation of the Ukraine situation and the extreme cheapness of Russian stocks,” he said.
The Micex is trading at 5.2 times projected 12-month earnings, compared with a multiple of 10.8 for the MSCI Emerging Markets Index.
Thailand’s stocks declined 0.6 percent as the military seized power following six months of political unrest. The baht was little changed at 32.560 per dollar. Tourism-related shares slid. Airports of Thailand Pcl lost 2.4 percent in Bangkok.
While Mark Mobius, Templeton Emerging Markets Group’s executive chairman, said the coup is “likely overall positive as it creates a more stable environment,” UBS Wealth Management’s Yonghao Pu said he is “still cautious” on the baht and Thai equities.
The Hang Seng China Enterprises Index of mainland shares listed in Hong Kong rose 0.1 percent, extending a 1.7 percent weekly advance. China Overseas rallied 5.5 percent today. The China Securities Journal said the government will remove restrictions on home purchases depending on market conditions.
Twelve of 18 economists say China has some national oversupply of housing, with seven saying the market is in a bubble state countrywide, according to a Bloomberg News survey.