Emerging Stocks Rise as China Gains Most in Month, Brazil Climbs

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Emerging-market stocks rose as speculation that China will start a new round of consolidation in state-owned companies to boost the economy pushed shares higher and Brazilian commodity producers led a rebound in Sao Paulo.

The Shanghai Composite Index jumped the most in a month. Oil producer Petroleo Brasileiro SA paced gains in the Ibovespa as the Brazilian benchmark rose after the biggest selloff in seven months. The ruble strengthened for the first time in four days and the Micex Index advanced to a three-month high as crude, Russia’s biggest export, climbed above $50 a barrel in London.

Chinese stocks surged as the South China Morning Post reported that the nation’s cabinet has approved plans to overhaul state-owned enterprises to boost an economy that is growing at the slowest pace in 25 years. Stocks in Brazil, which lists China as its biggest trading partner, gained as iron-ore producer Vale SA led the country’s raw-material companies higher.

“Emerging stocks are reacting to the bounce in Chinese equities on the back of speculation of further SOE reforms there,” Michael Wang, a London-based strategist at Amiya Capital LLP, said by e-mail. “I would position in defensive sectors such as health-care, away from commodities.”

The MSCI Emerging Markets Index advanced 0.3 percent to 887.70. The gauge has slumped 17 percent from this year’s high in April as traders bet an improving U.S. economy will embolden the Federal Reserve to raise the near-zero interest rates that have helped supported demand for riskier assets since 2008.

ETF Outflows

Investors who buy U.S. exchange-traded funds that buy developing-nation assets withdrew money for the sixth straight week in the period ended Aug. 7, data compiled by Bloomberg show. Redemptions totaled $526.1 million compared with withdrawals of $1.2 billion in the previous week.

The emerging-markets stock gauge has declined 7.2 percent this year and trades at 11.3 times the projected 12-month earnings of its member companies. That compares with a multiple of 16.5 for the MSCI World Index, which has gained 3.3 percent in 2015.

The Ibovespa rallied 1.6 percent. State-controlled Petrobras jumped 2.7 percent. Vale rallied 3.6 percent. The MSCI Brazil/Materials Index gained 2.7 percent.

The ruble strengthened 1.9 percent against the dollar as the Micex Index advanced 0.7 percent in Moscow. Brent crude rose 3.7 percent to $50.41 a barrel as Chinese oil imports climbed to a record in July. Russian assets gained even after a report showed the economy shrank for a second consecutive quarter.

Yield Spread

A Bloomberg gauge of 20 developing-nation currencies rose 0.4 percent. The premium investors demand to hold emerging-market debt over U.S. Treasuries narrowed five basis points to 374 basis points, according to JPMorgan Chase & Co. indexes.

Malaysian stocks entered a correction as concern grew about the political scandal enveloping Prime Minister Najib Razak. The FTSE Bursa Malaysia KLCI Index fell 1.7 percent, extending losses from its peak in April to more than 10 percent.

Foreign funds have dumped $3 billion of the country’s shares this year amid concern the crisis will distract Najib as a commodities rout and the prospect of higher U.S. interest rates threaten economic growth. The prime minister is fighting off a scandal linked to 1Malaysia Development Bhd., a debt-ridden state investment company.