Emerging-Market Stocks End Four-Day Drop as Russia, Brazil Rally
Emerging-market stocks rose for the first time in five days as Russian shares rallied after tension eased in Ukraine. The Ibovespa advanced the most in three weeks, led by gains in Brazilian real estate companies.
Chinese stocks jumped on bets inflation data will give policy makers more room to boost stimulus. OAO Sberbank rose 5 percent in Moscow after MSCI Inc. retained the shares in its Russia Index following a review. South Africa’s equity gauge, which jumped the most this year as the central bank propped up African Bank Investments Ltd. The lira fell as Fitch Ratings said Recep Tayyip Erdogan’s election as president did little to improve Turkey’s credit profile.
The MSCI Emerging Markets Index advanced 1.6 percent to 1,062.04. Russia ended military drills in the Astrakhan region, sending troops back to their permanent bases, Interfax reported Aug. 8. China’s consumer prices rose 2.3 percent in July, below the government’s target of 3.5 percent for 2014, data showed over the weekend.
There’s a “perception that Russia-Ukraine risk could de-escalate,” Brian Coulton, a London-based emerging-market strategist at Legal & General Investment Management, which oversaw 452 billion pounds ($759 billion) of assets at the end of 2013, said by e-mail. In China, “low inflation reinforces the perception of the authorities having further space to support growth with macro policy,” he said.
A Bloomberg gauge tracking 20 developing-country currencies strengthened for a second day. The premium investors demand to own emerging-market debt over U.S. Treasuries narrowed four basis points to 293, according to JPMorgan Chase & Co. indexes.
All 10 industry groups in the MSCI Emerging Markets Index rose, led by energy and financial companies. China Construction Bank Corp. (939) added 2.1 percent and China Resources Land Ltd. (1109) jumped 5.7 percent.
Sberbank rallied the most since May 7 in Moscow, erasing this month’s drop. MSCI said Aug. 8 it would keep Sberbank and VTB Group in its MSCI Russia Index after consultations with investors. Shares of the two banks had retreated this month after the New York-based index provider said it was reconsidering their inclusion in the measure following a deepening of U.S. and European Union sanctions.
VTB climbed 3.9 percent and the Micex added 1.8 percent in its second day of gains. Ukrainian shares fell 0.4 percent. The country’s military demanded that pro-Russian rebels surrender and dismissed their offer of a cease-fire as lawmakers prepared to consider sanctions that may curb Russian shipments of natural gas to Europe.
The Ibovespa rose 1.9 percent in Sao Paulo. Homebuilder Gafisa SA rallied 4.6 percent, leading gains in real estate stocks after reporting second-quarter earning before interest, taxes, depreciation and amortization that exceeded analysts’ estimates.
Equity gauges in Dubai (DFMGI) and Egypt gained at least 1.3 percent as tension in Ukraine eased and Israel and militants in the Gaza Strip agreed to an Egyptian-brokered truce. The FTSE/JSE Africa All Shares Index surged 1.7 percent in Johannesburg after the central bank stepped in to rescue African Bank, the country’s largest provider of unsecured loans
Iraqi bonds due in January 2028 increased for the first time in nine sessions. The U.S. destroyed several armed trucks and a mortar position held by Iraqi militants, the U.S. Central Command in Tampa, Florida, said yesterday.
Turkey’s lira declined 0.2 percent against the dollar and the Borsa Istanbul 100 Index fell 2.4 percent. Investors are awaiting clarity on who will be named the next prime minister after Erdogan’s election victory, Erkin Isik, a fixed-income strategist at Turk Ekonomi Bankasi AS, said by e-mail. Political risk in Turkey is set to remain a credit weakness that could lead to a negative rating action, Fitch said in a statement today.
The MSCI Emerging Markets Index fell for a second week in the five days through Aug. 8, dragging valuations to 10.9 times 12-month projected earnings, the lowest since June 25, according to data compiled by Bloomberg. The MSCI World Index trades at a multiple of 14.7.
The S&P BSE Sensex (SENSEX) Index climbed 0.8 percent in Mumbai, ending a three-day loss. Developer DLF Ltd. (DLFU) rallied 2.7 percent after India approved the introduction of real-estate investment trusts.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong advanced 1.9 percent, the most since July 23. The Shanghai Composite Index added 1.4 percent. China loosened monetary conditions last quarter at the fastest pace in almost two years, a Bloomberg LP gauge showed, testing the waning effectiveness of credit in supporting economic growth.
The rupiah strengthened 0.9 percent versus the dollar and the Jakarta Composite Index rose 1.2 percent on bets judges will dismiss a challenge to incoming president Joko Widodo’s election victory.