Bloomberg News

Emerging Stocks Gain for a Second Day on Greek Confidence Vote

June 22, 2011

June 22 (Bloomberg) -- Emerging-market stocks rose for a second day as Greece’s government survived a confidence vote and oil prices increased, outweighing the Federal Reserve’s lower U.S. economic growth forecasts for this year and next.

The MSCI Emerging Markets Index gained 0.3 percent to 1,116.25 as of 4:31 p.m. in New York. The gauge has gained 1.6 percent in the past two days, the first back-to-back advance since the two days to May 31. Russia’s Micex Index rose 0.3 percent and South Korea’s Kospi Index jumped 0.8 percent. China’s Shanghai Composite Index gained 0.1 percent. Brazil’s Bovespa index dropped 0.4 percent as unemployment fell to the lowest ever for the month of May, prompting speculation the country’s central bank will raise interest rates next month.

Greek Prime Minister George Papandreou’s government won a vote of confidence yesterday and now must gain parliamentary approval of budget cuts necessary to obtain a 12 billion euro ($17 billion) loan payment from the European Union and the International Monetary Fund which is needed to avoid default.

“Investors seem to be betting that Greece will move one step closer to securing further international financial aid, but the process would be far from smooth as strong protests by citizens against austerity measures will follow,” said Lim Chang Gue, a fund manager in Seoul at Samsung Asset Management Co., which oversees about $30 billion.

European stocks fell and U.S. shares declined, ending a four-day rally for the Standard & Poor’s 500 Index, as the Federal Reserve said it will end its $600 billion bond-purchase program while maintaining record monetary stimulus. The U.S. central bank lowered its 2011 growth forecast to 2.7 percent to 2.9 percent, down from April’s forecast of 3.1 percent to 3.3 percent.

‘Moderate Pace’

“The economic recovery is continuing at a moderate pace, though somewhat more slowly than the committee had expected,” the Federal Open Market Committee said today in a statement after a two-day meeting in Washington.

Oil rose 1.3 percent to settle at $95.41 a barrel in New York as a government report showed U.S. supplies fell a third week and refineries bolstered operating rates to the highest level in 10 months.

Russia’s OAO Gazprom, the world’s biggest natural gas producer, added 0.8 percent. Petroleo Brasileiro SA, Brazil’s state-controlled oil company, increased 0.1 percent.

Akbank TAS and Turkiye Is Bankasi AS each lost 2.1 percent in Istanbul and yields on the country’s two-year benchmark bond rose 13 basis points on bets that the central bank will increase lender reserve requirements in a meeting tomorrow to curb loan growth and contain the current-account deficit.

South Africa

The rand weakened 1 percent on speculation South African policy makers won’t raise interest rates even after consumer inflation quickened more than economists’ expectations in May.

HTC Corp., the Taiwanese mobile-phone maker that counts Europe as its second-biggest market, gained 5.4 percent to the highest close in more than a week. Samsung Electronics Co., for which Europe is the third-largest customer, climbed 1.5 percent in Seoul.

Dubai’s DFM General Index fell 1.8 percent, the most in a month, after MSCI Inc., whose stock indexes are tracked by investors with about $3 trillion in assets, delayed its decision on whether to raise the United Arab Emirates and Qatar to emerging-market status until December.

The Industrial & Commercial Bank of China Ltd. gained 0.7 percent and Agricultural Bank of China’s advanced 1.9 percent after valuations of bank shares on the Shanghai Composite Index approached the lowest levels in four years.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell four basis points, or 0.04 percentage point, to 313, 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 rose four basis points to 202.

--With assistance from Leon Lazaroff and Tal Barak Harif in New York, Ian Sayson in Manila and Saeromi Shin in Seoul. Editors: Linda Shen, Brendan Walsh

To contact the reporters on this story: Berni Moestafa in Jakarta at bmoestafa@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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