Emerging-Market Stocks Rise as India Raises Interest RateElena Popina, Maria Levitov and Ian Sayson
Emerging-market stocks rose, snapping a three-day drop, as a surprise rate increase in India bolstered bets central banks will shore up their currencies. Ukraine’s bonds jumped as the nation’s prime minister resigned.
The MSCI Emerging Markets Index added 0.3 percent to 934.09. India’s rupee paced gains in currencies, while Turkey’s lira rose for a second day after central bank Governor Erdem Basci said it’s necessary to use interest rates as the nation aims to rein in inflation. Dubai’s stocks led advances among 94 world equity indexes tracked by Bloomberg as Emaar Properties PJSC surged, while Vale SA drove a rally in Brazil’s Ibovespa. Ukraine’s bonds jumped the most since Russia’s bailout pledge.
India’s central bank Governor Raghuram Rajan boosted the repurchase rate to 8 percent from 7.75 percent, while only three of 45 analysts in a Bloomberg News survey predicted the move. Turkey’s central bank more than doubled its main interest rate at an emergency meeting, reversing years of policy after the lira slid to a record low. The Federal Reserve will probably keep scaling back bond buying at a two-day meeting starting today, according to a Bloomberg survey this month.
“India is now more concerned with inflation than with the weakness of the economy,” Bruce McCain, who helps oversee more than $25 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a telephone interview. “You see a number of other emerging markets struggling to stabilize their currencies. If they manage to do that, it will ease some of the concerns and give a bit of a breather to global markets in general.”
Seven out of 10 groups in the emerging-market gauge rose, led consumer discretionary companies. The iShares MSCI Emerging Markets Index exchange-traded fund increased 0.6 percent to $38.33. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, added 0.3 percent to 29.51.
Brazil’s Ibovespa snapped a three-day drop as iron-ore producer Vale followed commodities prices higher. Dental benefits provider Odontoprev SA advanced as Grupo BTG Pactual recommended buying the stock.
Russian shares fell for a fifth day, the longest losing streak in seven weeks as OAO GMK Norilsk Nickel, the world’s biggest producer of the metal, lost 2.2 percent. Grocer OAO Dixy Group tumbled 4.6 percent. The ruble strengthened for the first time in four days as the nation’s Finance Ministry prepared for its third set of bond auctions this year.
Ukrainian government bonds gained the most in more than a month as Prime Minister Mykola Azarov resigned to help end more than two months of street protests that turned deadly. Standard & Poor’s lowered Ukraine’s foreign-currency rating by one level to CCC+, seven steps below investment grade, today due to the “significant” escalation in political turmoil.
Turkey’s currency gained after central bank Governor Basci said it’s “necessary in this environment” to use interest rates. The bank in Ankara raised the benchmark repo rate to 10 percent from 4.5 percent, according to a statement posted on its website at midnight. It also raised the overnight lending rate to 12 percent from 7.75 percent, and the overnight borrowing rate to 8 percent from 3.5 percent.
India’s rupee rose from a two-month low, while the S&P BSE Sensex dropped to the lowest since Dec. 17. Maruti Suzuki India Ltd. had the steepest decline in 18 months after posting profit that missed estimates.
The Shanghai Composite Index gained, led by financial companies, after investors in a troubled high-yield trust were bailed out and New China Life Insurance Co. said profit probably increased last year.
Dubai’s DFM General Index added 3.2 percent as Emaar Properties PJSC, the developer of the world’s tallest skyscraper, jumped after EFG-Hermes Holding SAE raised the stock to buy. Egypt’s shares rose to the highest in almost four years on bets a possible presidential bid by the top military commander will restore stability. The pound gained in the black market after a record central bank currency sale.
The premium investors demand to own emerging-market debt over U.S. Treasuries fell one basis point, or 0.01 percentage point, to 341 basis points, according to JPMorgan Chase & Co.