Bloomberg News

Emerging-Market Stocks Snap 4-Day Drop on Easing Greek Concern

June 21, 2011

June 21 (Bloomberg) -- Emerging-market stocks snapped a four-day drop on speculation the Greek government would survive a parliamentary vote of confidence and as the cheapest valuations in more than two years lured investors.

The MSCI Emerging Markets Index rose 1.3 percent to 1,113.03 at 5 p.m. in New York, rebounding from the lowest level in more than three months. South Korea’s Kospi Index increased 1.4 percent, and China’s Shanghai Composite Index climbed from a nine-month low. Turkey’s ISE National 100 Index advanced 1.7 percent and Russia’s Micex Index gained 0.6 percent as oil rose in New York.

Greek Prime Minister George Papandreou won a confidence vote in the parliament in Athens after the close of trading. He needed it to allow his government to enact budget cuts to qualify for international aid, without which Greece could become the first euro-area country to default.

Concern the Greek debt crisis would spread had dragged valuations on MSCI’s emerging-market index down to about 10.1 times estimated profits, the lowest level since March 2009.

“Today’s key event will be the confidence vote in the Greek government,” analysts at RBC Capital Markets including Robert Beange in London wrote in a note to clients. “Success in the confidence vote could see a further short-term rally in risk.”

The Greek vote caps a week of turmoil for Papandreou, who fended off a revolt from the ranks of his ruling socialist Pasok party in parliament last week. MSCI’s emerging market gauge has lost 3.3 percent this year, compared with a 1.7 percent gain for the MSCI World Index of developed shares.

Asian Trade Data

Stronger-than-forecast trade data in Thailand and Taiwan helped strengthen emerging-market currencies, pushing the Korean won 0.6 percent higher against the dollar. The ruble also appreciated by 0.6 percent as oil climbed in New York for a second day of increases.

OAO Sberbank, the biggest lender in Russia, gained 1.2 percent in Moscow and OAO Gazprom, the world’s largest natural gas exporter, rose 0.9 percent.

The FTSE/JSE Africa All Share Index jumped 1.1 percent in Johannesburg as gold and copper prices increased.

Anhui Conch Cement Co. jumped 4.3 percent in Shanghai after the Shanghai Securities News said local governments will be allowed to sell bonds to fund public-housing construction.

China Construction Bank Corp. fell 2.3 percent in Hong Kong. Bank of America Corp. may sell some of its $21 billion stake in the China bank to bolster capital, said three people briefed on the plans.

Vietnam, Dubai

Vietnam’s VN Index rose 2.6 percent, the most in Asia, on speculation inflation may rise at a slower pace this month after consumer price increases decelerated in the nation’s two biggest cities.

The Dubai Financial Market General Index rose 0.4 percent after Joe Kawkabani, Franklin Templeton Investments (ME) Ltd.’s chief investment officer of equities in Dubai, said the United Arab Emirates’ improved securities settlement system may help MSCI Inc. boost the nation to emerging-market status.

MSCI, whose stock indexes are tracked by investors with about $3 trillion in assets, delayed its decision until December.

South Korea and Taiwan remained emerging markets instead of getting upgrades to developed markets, MSCI said in a statement today. The two countries, Asia’s biggest emerging markets after China and India, will be evaluated again for a shift in 2012.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell 8 basis points, or 0.08 percentage point, to 313 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

The Markit iTraxx SovX CEEMEA Index of eastern European, Middle East and Africa credit-default swaps fell 3.8 basis points to 200.115.

--With assistance from Nathan Gill in Quito. Editors: Marie- France Han, Brendan Walsh

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.


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