Emerging Stocks Rebound as China, Fed Outlook Boost Risk Demand

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  • Advancing crude prices drive Russian stock, currency gains
  • Commodity producers lead Brazilian shares higher as real rises

Chinese Economy Adds Plunging Exports to Market Trouble

Emerging-market stocks climbed and currencies strengthened as speculation mounted that China will take further steps to bolster growth in the world’s second-largest economy and concern faded that the Federal Reserve may raise U.S. interest rates this month.

The MSCI Emerging Markets Index added 1.6 percent to 790.57, its first gain in three days. Hong Kong’s Hang Seng China Enterprises Index rallied 4.1 percent. The Shanghai Composite Index ended a four-day drop on speculation state-backed funds bought shares. Raw-material producers led gains in Brazil, which counts China as its biggest trading partner. A gauge of 20 developing-nation currencies ended a five-day slump, rising 0.7 percent.

Data on Tuesday showed China’s overseas shipments fell 6.1 percent from a year earlier in yuan terms, while imports plummeted 14.3 percent, fueling speculation that the government will implement further measures to stimulate economic growth. It also underscored the fragility of global demand just one week before the Fed decides whether to increase U.S. interest rates. The U.S. jobless rate dropped in August to the lowest level since April 2008, while payrolls grew less than projected, according to a Sept. 4 report.

“The weaker Chinese data is creating expectations of further policy easing from the central bank,” said Michael Wang, a strategist at hedge fund Amiya Capital in London who favors stocks in India, South Korea and Taiwan. “The U.S. payrolls on Friday didn’t materially impact expectations for the Fed to move in September.”

Buffett’s View

The odds that the Fed will raise interest rates for the first time since 2006 held at 30 percent, compared with 38 percent at the end of last month. Emerging-market stocks have slumped as traders weighed the timing of an increase the near-zero borrowing costs that have supported demand for riskier assets in developing nations.

Billionaire investor Warren Buffett, the chairman and largest shareholder of Berkshire Hathaway Inc., said Tuesday that he remains bullish on China.

“We’ve had lots of ups and downs in this country, but overall we’ve kept moving forward, and China will be the same way,” he said in an interview on Bloomberg TV. “Long term, China’s got a long way to go.”

MSCI Inc.’s emerging-markets index has fallen 17 percent this year and trades at 10.4 times projected 12-month earnings, a 30 percent discount to the MSCI World Index, according to data compiled by Bloomberg. Investors pulled $1.65 billion out of U.S. exchange-traded funds that invest in emerging markets, marking 10 straight weeks of losses in the week ended Sept. 4.

“Because of the selloff in these markets and their underperformance, valuations are increasingly supportive; investors are underexposed,” Allan Conway, head of emerging market equities at Schroder Investment Management in London, said in a video message on Tuesday.

Steelmaker Usinas Siderurgicas de Minas Gerais SA rose the most in Sao Paulo, rallying 7.8 percent. The Ibovespa stock benchmark gained 0.6 percent. Brazil’s real strengthened 0.5 percent against the dollar.

All 10 industry groups in the developing-nation stock gauge climbed, led by consumer-discretionary companies. Naspers Ltd., Africa’s largest company by market value, added 3.8 percent in Johannesburg. PGE SA and Tauron Polska Energia SA each climbed at least 4.1 percent in Warsaw as the government backed off from a plan to push Polish utilities to invest cash into saving Kompania Weglowa SA, Europe’s largest thermal coal miner. Great Wall Motor Co. jumped 16 percent in Hong Kong after its sales in August increased.

The Shanghai Composite rose 2.9 percent, with almost all the gains coming in the last hour of trading. Late-day rallies have become a hallmark of government funds intervening to stabilize the equity market. China’s government spent 1.5 trillion yuan ($236 billion) trying to shore up stocks since a rout began three months ago through August, according to Goldman Sachs Group Inc.

Russia’s Micex Index added 0.8 percent and the ruble strengthened 1.8 percent against the dollar as Brent crude rose. South African stocks increased 1.5 percent. Indian shares advanced 1.7 percent as the rupee climbed 0.4 percent from a two-year low.

The premium investors demand to hold emerging-market debt over U.S. Treasuries narrowed eight basis points to 391 basis points, according to JPMorgan Chase & Co. indexes.