Emerging Stocks Advance as China, India Rally; Currencies WeakenNatasha Doff and Choong En Han
Emerging-market stocks rose after a surprise interest-rate cut in India sent banks soaring and as Chinese equities surged. The Swiss central bank’s decision to remove a cap on the franc sapped currencies in eastern Europe.
The MSCI Emerging Markets Index added 0.4 percent to 959.97. Indian stocks posted the steepest gain since May and the Shanghai Composite Index jumped the most in a week. The Ibovespa ended a four-day drop as better-than-forecast Brazilian economic data buoyed companies that depend on domestic demand. Equities in Poland and Hungary retreated more than 2 percent as companies with loans denominated in Swiss francs tumbled.
India cut the benchmark repurchase rate in an unscheduled review to revive growth after inflation eased. China’s aggregate financing, a measure of credit growth, soared to 1.69 trillion yuan ($273 billion), exceeding the 1.2 trillion yuan median estimate in a Bloomberg survey.
“The data from China on lending was a bit stronger than expected,” Neil Shearing, the chief emerging-markets economist at London-based Capital Economics Ltd, said by phone. “It suggests that policy has been more accommodative and that’s helped to give a bit of support to emerging-market stocks. Volatility is going to remain extremely high, particularly in places like Russia.”
The emerging-market index’s 100-day volatility a measure of price swings during the period, increased to 13 percent, the highest level since December 2013.
The developing-nation gauge is has gained 0.4 percent this year after posting a decrease of 4.6 percent in 2014. The gauge trades at 11.3 times projected 12-month earnings, the highest level since November. The MSCI World Index has dropped 2.8 percent in 2015, taking its valuation to a multiple of 15.3.
Russia equities increased for a third day after yesterday’s rally in crude boosted appetite for assets of the world’s largest energy exporter. The Micex Index added 0.6 percent to a six-week high. OAO Rosneft led gains in oil producers, advancing 5 percent.
The Ibovespa climbed 1 percent. Hypermarcas SA, a Brazilian consumer-products maker, rallied 5.1 percent to the highest since Nov. 28. Companies that depend on domestic demand rallied after a proxy for the country’s gross domestic product showed a slight increase in November from the prior month while economists had forecast a 0.2 percent drop.
The forint and zloty each tumbled more than 19 percent against the Swiss franc. The Swiss National Bank scrapped its minimum exchange rate of 1.2 francs against the euro today, abandoning a key tool in its policy kit designed to shield the economy from the euro area’s sovereign debt crisis. The franc slid as much as 29 percent versus the euro.
OTP Bank Nyrt., Hungary’s largest lender which has franc-denominated corporate loans, fell 3.4 percent, while Bank Zachodni WBK SA decreased 6.9 percent in Warsaw.
Eight out of 10 industry groups in the developing-markets measure advanced, paced by energy companies. DLF Ltd., an Indian developer, jumped 11 percent, the steepest increase among emerging-country shares.
The S&P BSE Sensex advanced 2.7 percent and the rupee halted a two-day loss. Reserve Bank of India Governor Raghuram Rajan cut the main repurchase rate in Asia’s third-largest economy to 7.75 percent from 8 percent.
The Shanghai Composite Index surged 3.5 percent as PetroChina Co. gained the most in a week. While new yuan loans missed economists’ forecasts, shadow lending rose to the highest since monthly records were first compiled in 2012. The Hang Seng China Enterprises Index added 1.5 percent.
Malaysia’s ringgit surged 1 percent, the most since October 2013, as the overnight rally in crude prices tempered concern that the oil-exporting nation will see revenue fall.