Emerging Stocks Rise as Commodity Gains Outweigh Terror Concern

  • Raw-material and energy shares lead benchmark's rebound
  • Russia's ruble jumps to highest this year as oil prices rise

Emerging-market stocks advanced as a rally in commodity prices outweighed a shift away from riskier assets after terrorist bomb blasts killed at least 31 people in Brussels.

The MSCI Emerging Markets Index rose 0.2 percent to 830.51 after reversing a decline of as much as 0.4 percent. A gauge of 20 developing-nation currencies increased as Russia’s ruble and the Colombian peso strengthened with oil prices.

Raw-material and energy stocks led a rebound in emerging markets as investor concern eased following a rush into haven assets after terrorist bombings at an airport and subway station in the Belgian capital. The MSCI developing-nation stock benchmark advanced for a fifth day. It entered a bull market last week as investors bet the Federal Reserve’s dovish stance on interest rates will weaken the dollar and support demand for riskier assets.

“The dollar initially shot up as a knee jerk reaction to the attacks,” said Jeffrey Kleintop, chief global investment strategist at Charles Schwab & Co, who helps oversee $2.5 trillion. “The flight to safety began to fade a little, which is good for the emerging markets.”

Seven of 10 industry groups in the MSCI gauge advanced, with measures of raw-material and energy stocks each gaining at least 0.6 percent. Brent crude rose for a second day, increasing 25 cents to $41.79 a barrel in London. The Bloomberg Commodity Index added 0.6 percent.

The equity benchmark has risen 4.6 percent this year and trades at an average 11.9 times projected 12-month earnings of its members. That compares with a multiple of 15.9 for the MSCI World Index, which has slipped 1.2 percent in 2016.

“We do not think the first quarter EM rally has initiated a period of sustained outperformance by emerging-market equities,” analysts at Barclays Plc including Ajay Rajadhyaksha said in an e-mailed note. “We are skeptical that the first quarter rally in commodities, in particular oil, will persist into the second quarter,” they said.

The Borsa Istanbul 100 Index slid 2 percent, the biggest drop in six weeks, as investors dumped the nation’s assets amid growing concern over a corruption investigation. South Africa’s benchmark gauge declined 0.8 percent.

The dollar-denominated RTS Index of Russian stocks gained 0.6 percent and the ruble rose 0.5 percent to the strongest level against the dollar this year. Chinese stocks slipped, sending the Shanghai Composite Index lower for the first time in eight days.

Fund Flows

In the U.S., exchange-traded funds that invest in emerging markets received a net $587.1 million of capital inflows on March 21, according to data compiled by Bloomberg, bringing the total in the past five days to $2.8 billion and leading net inflows among such funds.

A Bloomberg gauge of 20 emerging-market currencies gained 0.3 percent, halting a two-day drop. The Brazilian real and Argentine peso each added at least 0.6 percent. Columbia’s peso rose 1.4 percent to the strongest against the dollar since Nov. 11.

Malaysia’s ringgit rose to a seven-month high on speculation a crude rebound will boost the oil exporter’s finances and the state investment company 1Malaysia Development Bhd. may complete the sale of its energy unit this week.

Yield Spread

The offshore yuan declined as China’s central bank lowered its reference rate for a second day, stoking speculation the authorities judged previous gains in the currency excessive amid a slowing economy. The People’s Bank of China cut the fixing by a combined 0.53 percent on Monday and Tuesday, the biggest two-day reduction since January.

The Hungarian Forint declined 0.3 percent against the euro, as the National Bank of Hungary cut its key interest rate to 1.2 percent from 1.35 percent in a surprise move.

The premium investors demand to own emerging-market bonds over U.S. Treasuries narrowed two basis points to 395, according to JPMorgan Chase & Co. indexes.

The yield on Brazilian five-year government bonds fell 23 basis points to 13.66 percent, the lowest since August. The rate on similar notes in Russia rose two basis points to 9.14 percent.

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