Emerging-Market Stocks Rise on ECB Stimulus as Ibovespa Rallies
Emerging-market stocks rose to a two-week high and currencies strengthened after the European Central Bank announced stimulus measures and as the U.S. released May payrolls data.
The Ibovespa rallied the most among the world’s biggest benchmarks as eroding voter support for President Dilma Rousseff stoked speculation that a new leader will do more to boost Brazil’s economy. Oil & Natural Gas Corp. (ONGC), India’s largest state-owned oil exploration company, jumped 11 percent. Taiwanese personal-computer maker Acer Inc. (2353) climbed the most since July. The Micex Index entered a bull market in Moscow as President Vladimir Putin met with his Ukrainian counterpart.
The MSCI Emerging Markets Index added 1 percent to 1,044.93, pushing its gain for the week to 1.7 percent. The ECB took its deposit rate negative, the first major central bank to do so, and offered liquidity to lenders to encourage credit growth. Employers added 217,000 jobs in May to push U.S. payrolls past their pre-recession peak.
The ECB’s steps “put more pressure on investors with nominal return targets and liabilities like pension funds to go further afield and take more risk, which is positive for EM equities,” Emad Mostaque, a London-based strategist at Noah Capital Markets, said by e-mail. The U.S. data were “solid and in line with expectations. EM is gaining as the world looks to be calming and they look optically cheap,” he said.
The MSCI Emerging Markets Index has risen 4.2 percent this year and trades at 11 times projected 12-month earnings, compared with a multiple of 15.2 for the MSCI World Index of developed-country equities, which gained 4.4 percent in 2014.
Petroleo Brasileiro SA, the Brazilian state-controlled oil company, rallied 8.3 percent, leading the emerging-market gauge’s advance. The Ibovespa increased 3 percent. Rousseff’s support fell to 34 percent this month from 37 percent in May, according to a Datafolha poll published today on Folha de Sao Paulo’s website.
A Bloomberg gauge tracking 20 emerging-market currencies appreciated for a second day. The premium investors demand to own developing-country debt over U.S. Treasuries fell eight basis point to 259, according to JPMorgan Chase & Co. indexes. Nine out of 10 of the MSCI Emerging Markets Index’s industry groups advanced, led by energy companies.
The S&P BSE Sensex Index rallied 1.5 percent in Mumbai, taking its jump this quarter to 13 percent amid speculation the alliance led by the Bharatiya Janata Party will spur growth in Asia’s third-largest economy.
Oil & Natural Gas soared to a record, bringing this week’s rally to 23 percent. Reliance Industries Ltd. (RIL), owner of the world’s largest refining complex, increased 3 percent to its highest level since May 23. India’s oil ministry has to decide on gas price increases by July 1, a government official told reporters in New Delhi yesterday.
The ECB lowered its deposit rate to minus 0.1 percent and the benchmark refinancing rate by 10 basis points to 0.15 percent. ECB President Mario Draghi said the central bank will begin new, “targeted” offerings of liquidity to banks to encourage them to lend money to the real economy.
“The ECB move is a big positive for emerging-market assets,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd., said by phone from Kerala, south India.
The Micex Index rose 1 percent today, extending its gain from this year’s low on March 14 to more than 20 percent. Putin held his first talks with Ukraine’s newly elected president, Petro Poroshenko, as France used the backdrop of D-Day commemorations to ease tensions over the separatist unrest in eastern Ukraine.
Acer jumped 6.9 percent in Taipei, taking its two-day advance to 14 percent, the most since May 2009, after announcing a partnership with MediaTek Inc. to develop wearable technologies.
The Hang Seng China Enterprises Index fell 0.2 percent, reducing this week’s gain to 0.9 percent. BYD Co., the Chinese automaker partially owned by Warren Buffett’s Berkshire Hathaway Inc., rose for a fifth day in Hong Kong after Deutsche Bank AG raised its rating on the stock.
(An earlier version of this story was corrected to clarify that the MSCI Emerging Markets Index is not headed for a second weekly gain.)