Emerging-Market Stocks End Three-Day Drop on China Stimulus Bets

Emerging-market stocks rose for the first time in four days as Chinese equities rallied to a seven-year high after the central bank signaled further stimulus.

The Shanghai Composite Index advanced 2.6 percent after central-bank Governor Zhou Xiaochuan said the nation’s growth rate has tumbled “a bit” too much and that policy makers have scope to respond. Equities in Brazil, which ships about 18 percent of its exports to China, ended a two-day decline. The dollar-denominated RTS Index of Russian stocks jumped the most in four weeks.

The MSCI Emerging Markets Index rose 1.2 percent to 969.13. The gauge has climbed 1.3 percent in the first quarter. The European Central Bank’s 60 billion-euro ($65 billion) monthly bond-purchase plan and speculation the Federal Reserve won’t rush to increase interest rates helped support developing-country assets since January.

“It is speculation of imminent policy easing by the central bank in China that is fueling the rally,” Michael Wang, a strategist at Amiya Capital LLP in London, said by e-mail. “It has been a pretty lackluster quarter. Emerging markets are range-bound for now -- valuations look interesting, but currency weakness ahead of the Federal Reserve’s first rate hike will keep the equity upside capped.”

All 10 industry groups in the emerging-market index rose, led by industrial and energy shares. The gauge trades at 11.8 times projected 12-month earnings, compared with a multiple of 16.7 for the MSCI World Index.

China Stimulus

China has room to act both with interest rates and quantitative measures, Zhou said in remarks Sunday at the Boao Forum for Asia in Hainan province. His comments followed signs that the world’s second-largest economy slowed further in the first quarter, after recording its weakest expansion since 1990 last year.

A measure of Hong Kong-traded Chinese shares jumped 3.4 percent, the most this year. Chinese money managers no longer need to be part of a program for qualified domestic institutions to invest in Hong Kong shares via an exchange link between the two cities, the China Securities Regulatory Commission said Friday.

The Ibovespa gained 2.3 percent in Sao Paulo. Steelmaker Gerdau SA rallied 4 percent, while pulp producer Fibria Celulose SA jumped 2.3 percent to a record high. China is Brazil’s biggest export market.

The RTS Index climbed 2.6 percent, taking its quarterly rally to 11 percent. The ruble strengthened 0.6 percent after erasing a loss of as much as 1.3 percent as companies made their final tax payments of the month. Russia’s recession may be over in the third quarter and the ruble will remain at the current levels as crude prices stabilize, Deputy Finance Minister Maxim Oreshkin said Friday.

ETF Flows

The S&P BSE Sensex jumped 1.9 percent in Mumbai, posting the biggest gain since Jan. 15. Three weeks of losses pushed the gauge’s relative strength index to 29 on Friday, signaling to some analysts that stocks were poised to rebound.

Pakistan’s equity gauge declined 3.4 percent. Altaf Hussain told supporters in Karachi that he’s resigning as the chief of the city’s biggest political party after more than three decades. He changed his mind several hours later.

A Bloomberg Index tracking 20 developing-nation currencies declined 0.2 percent, its fourth straight decline. The South African rand and Malaysian ringgit lost at least 0.7 percent.

While emerging-market stocks are up for the quarter, they’ve fallen in three of the past four weeks. Net inflows to U.S. exchange-traded funds that invest in emerging-markets slowed in the week ended March 27, led by India and Brazil, data compiled by Bloomberg showed. Deposits into such funds totaled $430 million, down 19 percent from the previous week.

The premium investors demand to own emerging-market debt over U.S. Treasuries narrowed one basis point to 366 basis points, according to JPMorgan Chase & Co. indexes.

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