Emerging Stocks Rally on Fed Outlook as Volatility Drops
Emerging-market stocks rose, capping a 0.4 percent weekly advance, as an increase in the U.S. jobless rate boosted prospects the Federal Reserve will continue stimulus that has stoked investment in developing nations.
Energias do Brasil SA drove a 0.8 percent jump in emerging utility stocks. PT Bank Negara Indonesia (BBNI) surged the most in two years after PT Bank Rakyat Indonesia posted its largest annual profit since at least 2000. Russia’s OAO Rosneft dropped after earnings trailed estimates, while Vale SA (VALE3), the world’s third- biggest mining company, rose to a three-week high in Sao Paulo after posting better-than-expected iron-ore output. Emerging- market bonds posted their biggest slump since May.
The MSCI Emerging Markets Index climbed 0.4 percent to 1,072.82 in New York, after data showed the U.S. added jobs in January, while the unemployment rate rose. The gauge’s 100-day volatility dropped to 9.1, the lowest level since August 1997. The Federal Reserve held interest rates near zero this week and said that it will continue bond buying that has helped drive the developing-nation index up 22 percent from a June low.
“Levels of volatility are very, very low everywhere as central banks, through interventions and loose monetary policy, move much of the price of crisis out of the markets,” Martial Godet, head of emerging-market strategy at BNP Paribas SA, said by phone from London. The increase in the U.S. jobless rate means we’re moving away “from the moment when the stimulus for the economy would be removed, so overall it’s better.”
The iShares MSCI Emerging Markets Index (MXEF) exchange-traded fund, the ETF tracking developing-nation shares, rallied 0.7 percent to $44.51, extending its climb in the week to 0.8 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, fell 5.7 percent to 18.14.
Payrolls rose 157,000 in January, following a revised 196,000 increase in December and a 247,000 surge in November, according to U.S. Labor Department figures released today. The jobless rate climbed to 7.9 percent last month, from 7.8 percent. U.S. manufacturing expanded more than forecast in January, while confidence among American households unexpectedly rose last month. The Standard & Poor’s 500 Index (SPX) added 1 percent.
The Fed said Jan. 30 that it will maintain bond purchases at $85 billion a month to bolster the U.S. economy, which grew at the slowest pace in the fourth quarter since in contracted in 2009. The U.S. benchmark rate was held at between zero and 0.25 percent, and compares with Brazil’s 7.25 percent key rate, India’s 7.75 percent and China’s 3 percent deposit rate.
The MSCI emerging-market index’s historical volatility dropped to levels last seen before the 1997 Asian financial crisis sparked a collapse in regional currencies and led to International Monetary Fund bailouts of countries including South Korea.
Brazil’s Bovespa (IBOV) Index climbed for a second day, adding 1 percent to reduce its 1.3 percent weekly decline. Sao Paulo- based power producer EDP jumped 2.4 percent.
Preferred shares of Cemig, the nation’s second-biggest utility by market value, rose for the first time in eight days, rallying 1.9 percent. The company’s Jaguara hydroelectric plant license will probably be auctioned off in the first half, Miranda Farias, director of electricity planning at the government’s energy planning and research agency, said yesterday.
Vale added 1.3 percent after saying that fourth-quarter output rose 3.1 percent from a year earlier, beating the average of six analysts’ estimates.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. advanced 0.8 percent to 101, bringing its gain in the week to 1.4 percent. American depositary receipts of travel agency Ctrip.com International Ltd. (CTRP) jumped 3.2 percent after posting fourth-quarter net income that beat analysts’ estimates and saying margins will probably stay at a similar level in the first quarter of 2013.
The Shanghai Composite Index rallied 1.4 percent, capping a 5.6 percent weekly advance, as two purchasing managers’ indexes indicated China’s manufacturing expanded in January. Benchmark indexes in Indonesia and the Philippines (PSE) rose to records. Thailand’s SET Index climbed 1.7 percent to the highest level since November 1994.
Russia’s Micex Index (INDEXCF) ended the day little changed, after earlier slipping as much as 0.2 percent. Rosneft, Russia’s biggest oil producer, sank 1.7 percent to the lowest level since Jan. 17 after reporting fourth-quarter net income fell 69 percent to 57 billion rubles ($1.9 billion) versus the median analysts estimate of 77.2 billion rubles. Novorossiysk, Russia’s largest Black Sea port, surged 4.2 percent.
Istanbul’s ISE National 100 Index gained 1.8 percent. Benchmark indexes in India and South Korea declined.
JPMorgan Chase & Co.’s EMBI Global Diversified Index of emerging-market dollar-denominated debt sank 0.1 percent today, extending the weekly slide to 1.4 percent, the most since the week ended May 18.
The Polish zloty strengthened 0.7 percent against the euro, while Russia’s ruble jumped 0.6 percent versus the dollar. South Korea’s won completed its biggest weekly loss since May on concern a weakening yen will hurt the nation’s exports.
Funds focused on emerging markets lured $3.6 billion in the week to Jan. 30, down from the previous period’s $4 billion of inflows, Markus Rosgen and Yue Hin Pong, analysts at Citigroup Inc. (C), wrote in a report today. Global stock funds received $18.8 billion, exceeding the $3 billion that went into bonds, the analysts wrote, citing data from research firm EPFR Global.
The MSCI emerging-market equities gauge weekly jump trailed the 0.8 percent advance in the MSCI World Index. The developing- nations measure trades for 11 times company earnings, while the MSCI World, which tracks developed markets, has a valuation of 13.8, according to data compiled by Bloomberg.
India’s Tata Motors Ltd. (TTMT) fell 5.5 percent in Mumbai, extending four days of declines after reporting its local sales in January fell dropped 30 percent. The company’s ADRs traded in New York rose for the first time in four days, adding 0.8 percent.
South Korea’s won slipped 0.8 percent against the dollar as Deputy Knowledge Economy Minister Han Jin Hyun said that a weak yen will affect the country’s exports “after some delay.” A global currency war seems to be breaking out as monetary easing in Japan drags the yen lower, Ha Sung Keun, a Bank of Korea board member, said Jan. 28 in Seoul.
Doosan Heavy Industries & Construction Co Ltd. (034020) slumped 8.1 percent, the biggest drop in the emerging-markets index. The South Korean company is considering selling new shares, Korea Economic Daily reported, citing unidentified investment banking officials.
Bank Negara jumped 8.3 percent to lead gains among financial companies. Bank Rakyat (BBRI), Indonesia’s second-largest lender by assets, added 0.6 percent to a two-week high after reporting 2012 net income of 18.5 trillion rupiah ($1.9 billion), which beat the 17.08 trillion-rupiah median estimate of analysts in a Bloomberg News survey. Bank of the Philippine Islands gained the most in a week on record earnings.
Globe Telecom Inc. (GLO) surged more than 10 percent in Manila, the most in almost two years and the biggest gain on the MSCI emerging index. A 7.4 percent slump yesterday dragged its valuation to a three-week low of 13.2 times estimated profit.