Emerging Stocks, Currencies Gain as Crude Touches $50 a Barrel

  • Currencies in South Africa, Malaysia among biggest gainers
  • Nigerian stocks jump to their highest level since November

Brent Tops $50 for First Time in Six Months

Emerging-market stocks and currencies gained for a second day as Brent crude prices exceeded $50 a barrel for the first time in six months, boosting the outlook for commodity-producing countries.

A gauge of developing-nation energy stocks jumped 0.8 percent, led by Cnooc Ltd. in Hong Kong. Malaysia’s ringgit and the South African rand added at least 0.5 percent. Equities in Nigeria, Africa’s second-biggest crude producer, rose to the highest level since November. Larsen & Toubro Ltd. increased the most since 2009 in Mumbai after earnings beat estimates. Turkish stocks declined as Deputy Prime Minister Mehmet Simsek lost some of his economic oversight roles. Brazilian markets were closed for a holiday.

Brent crude rose to as high as $50.51 a barrel in London before erasing gains to close at $49.46. Prices have risen 1.5 percent this week and are on pace for a fourth monthly advance. The rebound, driven in part by signs that a two-year supply surplus is coming to an end, is improving the fiscal outlook for developing-nation exporters from Russia to South Africa and Qatar. The impact of higher oil prices on developing-nation assets has been offset by increasing odds that the Federal Reserve will raise interest rates in the next few months.

“Oil remains a major sentiment driver for all emerging markets,” said Regis Chatellier, a strategist at Societe Generale SA in London, who favors sovereign credit of Mexico, Peru, Argentina and Serbia. “What is mitigating the bullish mode is the potential hike in the U.S. Given the rebound in oil, the rally should have been more pronounced.”

The MSCI Emerging Markets Currency Index advanced for a second day, increasing 0.2 percent. The equity benchmark advanced 0.4 percent to 802.93.

For more on emerging-market performance and what it means for the rest of the world, click here.

The MSCI emerging-market stock gauge trades at 11.5 times the projected 12-month earnings of its members, compared with a multiple of 16 for the the MSCI World Index of developed-nation stocks.

Cnooc climbed 2.1 percent. The Micex Index rallied 0.8 percent in Moscow. Russia gets about 60 percent of export revenue from oil and gas industries. The FTSE/JSE Africa All Shares Index increased 0.4 percent in Johannesburg.

The S&P BSE Sensex Index gained 1.9 percent in Mumbai to a six-month high. Larsen & Toubro rose 14 percent. The nation’s biggest engineering conglomerate reported earnings of 24.5 billion rupees ($364 million) in the fourth quarter, topping the 18.6 billion-rupee estimate of analysts.

India, Turkey

The Borsa Istanbul 100 Index fell 0.7 percent in its second day of losses, as initial euphoria generated by Simsek’s reappointment dissipated. Responsibility for capital markets and banking regulators, as well as the Savings Deposit Insurance Fund, was taken away from the former Merrill Lynch strategist at the first meeting of the new cabinet and given to Nurettin Canikli, another deputy prime minister.

Turkiye Halk Bankasi AS dropped 2.9 percent as allegations of bribery that involve the lender’s former chief executive prompted concern the bank may be liable.

Currencies

South Africa’s rand gained 1 percent. The ringgit added 0.5 percent as oil’s gain bolstered sentiment for Asia’s only major crude exporter. The Malaysian currency is set for its biggest two-day advance in more than a month, paring its decline in May to 4.3 percent.

Qatari bonds fell for a fourth day, pushing the yield up two basis points to 2.65 percent. The country sold $9 billion of Eurobonds in three maturities on Wednesday, almost double the amount that bankers close to the deal said the Gulf nation was targeting.

For more details on the mega Qatar bond sale, click here.

China sold 3 billion yuan ($458 million) of sovereign bonds in London on Thursday in the nation’s first offshore sale outside of Hong Kong as the biggest emerging-nation economy seeks to internationalize its currency. The yield on benchmark 10-year sovereign debt in China was little changed at 2.94 percent on Wednesday, according to Chinabond data. Offshore notes traded in Hong Kong yielded 3.69 percent on Thursday.

The premium investors demand to own emerging-market debt over U.S. Treasuries rose four basis points to 397 basis points, according to JPMorgan Chase & Co. indexes.

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