Emerging Stocks Gain as ECB Cuts Interest Rates; Ruble Rallies
Emerging-market stocks rose, led by financial and telecommunications companies, as the European Central Bank cut its deposit rate below zero to counter the prospect of deflation. Russia’s ruble rallied.
The MSCI Emerging Markets Index added 0.5 percent to 1,036.42. ECB President Mario Draghi reduced the deposit rate to minus 0.10 percent from zero, making the institution the world’s first major central bank to use a negative rate. The 21 nations in the gauge send about 30 percent of exports to the European Union on average, data compiled by the World Trade Organization show.
The ruble rose 1 percent against the dollar after the Group of Seven spared Russia more sanctions. Acer Inc. and MediaTek Inc. (2454) jumped after announcing a deal to develop wearable technologies. Samsung SDI Co. climbed to a six-month high. Oil producer Petroleo Brasileiro SA led a drop in Brazil’s Ibovespa.
The ECB cut its benchmark rate to 0.15 percent from 0.25 percent. Draghi said the ECB will introduce new, “targeted” offerings of liquidity to banks to encourage them to lend money to the real economy, with an initial size of 400 billion euros ($546 billion). Officials will also start work on purchases of asset-backed securities, he said.
A report tomorrow will probably show U.S. hiring slowed to 215,000 in May from 288,000 in April, according to a Bloomberg survey.
Emerging-market stocks should be able to trade “on a positive footing” after the ECB announcement, Chow said. “We warn against taking a more aggressive positive stance because of U.S. payrolls data out tomorrow.”
The emerging-markets gauge has climbed 3.3 percent this year and trades at 10.8 times projected 12-month earnings. The MSCI World Index has risen 4 percent and is valued at a multiple of 15.1, according to data compiled by Bloomberg.
All 10 industry groups in the developing-nations index advanced, with measures of financial, telecommunication and utility companies increasing by at least 0.7 percent. A sub-index of technology shares added 0.3 percent, trading near its record-high reached on June 3. Acer (2353) rose 6.9 percent to the strongest level since Sept. 25, while MediaTek added 3.4 percent.
Petrobras, as Petroleo Brasileiro is known, fell 1.7 percent, leading a 0.5 percent drop in the Ibovespa. Brazilian stocks declined as the central bank cited slowing economic growth even as inflation remained close to the upper limit of the government’s target.
Stocks rose in Qatar for the first time in four days, with the QE Index (DSM) gaining 0.7 percent, as the worst rout in the nation’s stocks in nine months attracted bargain hunters.
Egypt’s benchmark EGX30 Index jumped 4.7 percent, the most in 11 months. Beltone Financial Holding SAE and two other investors is seeking to buy a 20 percent stake in EFG-Hermes Holding SAE a day after Saudi Arabia’s King Abdullah called for an international effort to raise funds for the country’s battered economy.
The Borsa Istanbul 100 Index (XU100) climbed 1.8 percent to a one-year high. The WIG30 Index in Warsaw added 0.8 percent, rallying for a fourth day.
The ruble rose for a second day as President Vladimir Putin prepared to meet European leaders at a G-7 leaders’ meeting in Brussels that favored diplomatic efforts to resolve the Ukraine crisis.
The premium investors demand to own emerging-market debt over U.S. Treasuries decreased one basis point to 268, according to JPMorgan Chase & Co. indexes.
The Kospi Index fell 0.7 percent in South Korea. LG Household & Health Care Ltd. slumped 12 percent in Seoul, the most since Jan. 24. Vice chairman Cha Suk Yong sold 22,000 of his 32,000 shares, according to a regulatory filing on June 3. The sale may cause a “negative knee-jerk reaction” as the news was unexpected, Daiwa Securities Capital Markets wrote in a report.
Samsung SDI Co. climbed 6.7 percent to the strongest level since Dec. 5, while Cheil Industries Inc. surged 6.4 percent. The companies said on June 3 they will sell treasury shares to Samsung Electronics Co. (005930)
The Hang Seng China Enterprises Index (HSCEI) of mainland companies climbed 0.5 percent, while the Shanghai Composite Index rose for the first time in five days, up 0.8 percent. Benchmark equity gauges in Taiwan, the Philippines, Malaysia and Thailand rose at least 0.1 percent.
To contact the editors responsible for this story: Daliah Merzaban at firstname.lastname@example.org Ash Kumar, Richard Richtmyer