Emerging ETF Rises as China Expands Bank Funding OptionsJulia Leite, Natasha Doff and Harry Suhartono
The iShares MSCI Emerging Markets Index rose, extending its biggest weekly gain in a month, as speculation China is loosening funding restrictions for property developers and banks bolstered confidence in the economy.
The exchange-traded fund added 0.6 percent to $38.98 at 4 p.m. in New York, bringing its advance for the week to 1.5 percent. The MSCI Emerging Markets Index rose 0.5 percent to 944.96. The Shanghai Composite Index climbed the most in four months, while the yuan posted the worst week since at least 2007. The Micex Index slid as the U.S. and the European Union expanded sanctions against Russia. Turkey’s lira and stocks fell after Turkey’s Prime Minister Recep Tayyip Erdogan’s decision to block access to Twitter nine days before local elections.
Equities rebounded after reaching the cheapest valuation level in a decade relative to developed stocks. China issued rules for a trial program allowing companies to sell preferred stock, expanding financing options for the nation’s banks. The Shanghai Securities News reported regulators are reviewing financing applications from “many” listed developers. The government is trying to bolster real estate and financial companies as the economy slows and bad debts increase.
“The real issue in the emerging world is: is it collapsing or just slowing?,” James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees about $360 billion in assets, said by phone. “I think we’re going to determine that China and the emerging markets as a whole have found a bottom.”
Developing-market equities have fallen 5.8 percent so far in 2014, trailing shares in advanced economies, which are little changed this year. The benchmark for emerging-market nations trades at a price-to-book ratio of 1.4, its cheapest valuation level versus the MSCI World Index since 2004, according to data compiled by Bloomberg.
The Shanghai Composite Index climbed the most since Nov. 18 as Shanghai Pudong Development Bank Co. and Industrial Bank Co. surged at least 6.6 percent, while China Vanke Co. and Poly Real Estate Group Co. led a rally in property companies. The yuan posted a record weekly decline as the central bank cut the currency’s reference rate and on rising concerns over growth.
Brazil’s Ibovespa extended its biggest weekly advance since September as iron-ore producer Vale SA led gains among raw-material producers as commodities rebounded.
The Micex Index declined 1 percent as OAO Sberbank and OAO Gazprom tumbled. Russia completed its annexation of Crimea as the EU signed a political accord with Ukraine, escalating the worst standoff between Russia and the West since the Cold War.
Turkey’s currency dropped as much as 0.7 percent, while the Borsa Istanbul 100 Index declined for a third day. Twitter access was blocked after Erdogan said the microblogging service ignored court orders to remove content related to a government corruption scandal. Erdogan said yesterday he’d “dig up Twitter and so on -- all of them -- from the roots” at a party rally. Last week he also said Turkey might block access to Facebook and Google Inc.’s YouTube.