Emerging Stocks Advance Led by Russian Shares Before Fed
Emerging-market stocks rose a second day, led by Russian shares, as investors awaited this week’s Federal Reserve policy meeting. Turkey’s lira slumped after riot police stepped up their crackdown on protesters.
Stocks pared gains on concern the Fed may taper stimulus. Russia’s Micex Index added 2 percent as OAO Novatek paced a rally in commodity shares. OGX Petroleo & Gas Participacoes SA tumbled to a record-low, leading losses among companies controlled by Brazilian billionaire Eike Batista. Turkey’s lira fell for the first time in a week. Venezuela’s bond yields rose as the nation’s credit rating was cut by Standard & Poor’s.
The MSCI Emerging Markets Index added 0.4 percent to 957.12, trimming a gain of as much as 0.6 percent. The U.S. Federal Open Market Committee starts a two-day policy meeting tomorrow. The developing-nation measure has fallen 8.7 percent since Fed Chairman Ben S. Bernanke said May 22 that U.S. policy makers “could” scale back economic stimulus efforts if the employment outlook showed “sustainable improvement.”
“The question is whether or not there’s enough encouragement from the Fed this week,” said Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland. “My guess is that the Fed will steer a middle course. They won’t be overly discouraging, but they won’t be overly encouraging to those who’ve used the Fed’s program as a crutch to avoid looking at other arguments for owning stocks.”
Equities pared gains after the Financial Times reported that Fed Chairman Bernanke is likely to signal the central bank is close to tapering its $85 billion in asset purchases at the conclusion of a policy meeting June 19.
Energy and phone shares led gains among 10 groups in the emerging-market index today. The broad measure has lost 9.3 percent this year, compared with a 10 percent advance in the MSCI World Index of developed-country stocks.
The iShares MSCI Emerging Markets Index exchange-traded fund rose 0.9 percent to $39.67. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, added 1.2 percent to 27.29.
Brazil’s Ibovespa fell as OGX slid the most in almost a year after Veja magazine reported Batista is selling more assets to raise funds. The stock slumped 15 percent, while miner MMX Mineracao & Metalicos SA plunged 14 percent and port developer LLX Logistica SA lost 8.4 percent.
Yields on Venezuela’s benchmark dollar bonds due 2027 surged 45 basis points, or 0.45 percentage point, to 11.40 percent at 5:04 p.m. in New York. S&P downgraded the nation, citing concern that division within President Nicolas Maduro’s administration may impair the government’s ability to shore up a sputtering economy.
Russian stocks climbed for a second day as UBS AG named the country its preferred emerging equity market in the region on valuations and economic potential. OAO Novatek, the nation’s second-biggest natural-gas producer, jumped 5.4 percent as Bank of America Corp. raised the stock to buy.
The Borsa Istanbul Stock Exchange National 100 Index had the biggest decline among major emerging-market indexes, falling 1.3 percent, as Akbank TAS (AKBNK) and Turkiye Garanti Bankasi AS led banks lower.
OTP Bank Nyrt. and Magyar Telekom Nyrt. led the slump in Hungary’s benchmark stock index after Economy Minister Mihaly Varga said the government proposes to raise taxes on financial transactions, telecommunications and mining.
The Shanghai Composite Index fell for the ninth time in 10 days, dragged down by property developers and material producers, after Beijing tightened rules for real estate projects to contain a rebound in home prices. China Vanke Co., the nation’s biggest developer, slumped on speculation stricter property curbs will hurt earnings. The Hang Seng China Enterprises Index (HSCEI) snapped 12 days of losses.
India’s benchmark stock index rose to a one-week high on bets the central bank will resume lowering borrowing costs after holding interest rates today. Tractor maker Mahindra & Mahindra Ltd. (MM) climbed the most in two weeks after agreeing to buy 13.5 percent of Cie Automotive SA, a Spanish auto-parts maker.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell five basis points, or 0.05 percentage point, to 315 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.