Emerging Stocks Rise as Samsung Rally Outweighs Fed Rate Outlook

  • China baby-related stocks gain after one-child policy ends
  • Ruble appreciates after Russia keeps interest rates unchanged

Emerging-market stocks rose, reducing their first weekly decline this month, as Samsung Electronics Co. led a rally in technology companies after announcing a share buyback, outweighing concern that higher U.S. interest rates will sap demand for riskier assets.

The MSCI Emerging Markets Index increased 0.2 percent to 847.84 in New York, paring its five-day drop to 2.4 percent. Samsung’s preferred shares contributed the most to the advance, surging 11 percent. A measure of raw-material companies fell the most among 10 industry groups. The ruble rose 0.7 percent against the dollar after Russia’s central bank kept interest rates unchanged. A gauge of 20 developing-nation currencies jumped from a four-week low.

The technology-stock rally helped halt a four-day decline in emerging markets driven partly by the Federal Reserve’s signal that it might raise U.S. borrowing costs this year. The Fed’s near-zero interest rates have helped prop up demand for riskier assets in developing nations. The equity benchmark gained 7 percent this month. The rally fizzled amid concern the dollar will strengthen after a Fed move, luring money out of emerging markets. Futures traders are assigning a 50 percent probability that the increase will come in December, data compiled by Bloomberg show.

“We saw the biggest Fed policy repricing in two years with probabilities for a December hike jumping from around 30 percent to 50 percent,” Bernd Berg, director of emerging market strategy at Societe Generale in London, said by e-mail.

Speculation that the Fed will make its first move this year intensified after policy makers dropped a reference to global risks and referred to their “next meeting” in December as they discussed the potential timing.

The developing-nation stock gauge has dropped 11 percent this year and is valued at 11.2 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index, which has fallen 0.2 percent in 2015, trades at a multiple of 16.

Samsung pushed a gauge of technology stocks to a 0.8 percent gain as six of 10 industry groups advanced. The smartphone maker said it will buy back and cancel 11.3 trillion won ($10 billion) of shares and boost capital spending by 14 percent this year. Raw-material companies slumped for a second day.

BRF SA, Brazil’s biggest processed-food maker, plunged as much as 11 percent, the steepest intraday drop in seven years, after reporting lower-than-expected third-quarter sales amid “extremely challenging’ economic conditions in the country. It was the worst performance in the Ibovespa equity benchmark, which rose 0.5 percent for the first advance in six days, paring a weekly decline.

Lira, Ruble

The lira strengthened 0.8 percent on the last trading day before Turkish elections, extending its gain in October to 3.8 percent. While polls show a hung parliament is likely, signs that politicians are willing to form a coalition boosted sentiment battered by months of political deadlock. The nation’s benchmark stock index fell on Friday, paring the biggest monthly increase in a year.

Russia’s ruble strengthened for the second day this week. The currency posted its first monthly advance since April. Policy makers left the one-week auction rate at 11 percent, the Bank of Russia said in a statement on Friday. Rate setters led by Elvira Nabiullina are plotting a course for the world’s largest energy exporter out of a recession that threatens to be the nation’s longest in two decades.

China Rebound

The Shanghai Composite Index capped its first monthly gain since May, jumping 11 percent as the government took measures to end a $5 trillion rout and policy makers introduced stimulus to boost economic growth. Hong Kong’s Hang Seng China Enterprises Index climbed 11 percent this month. 

China Mengniu Dairy Co. rallied 3.4 percent in Hong Kong as baby-related stocks advanced after China ended its decades-long one-child policy. A committee of China’s ruling Communist Party approved plans to allow all couples in China to have two children, the Xinhua News Agency said Thursday. That ended the rule, which was adopted nationwide in the late 1970s. 

The premium investors demand to own emerging-market debt over U.S. Treasuries widened six basis points to 392 basis points, according to JPMorgan Chase & Co. indexes.

(An earlier version of this story corrected the spelling of China Mengniu Dairy.)

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