Bloomberg News

Emerging-Market Stocks Rise for Weekly Gain on Europe’s Aid Plan

July 22, 2011

July 22 (Bloomberg) -- Emerging-market stocks advanced, pushing the benchmark index to its biggest weekly gain in three, as euro-area leaders sought to persuade investors that measures they’re taking to staunch the region’s sovereign debt crisis will work.

The MSCI Emerging Markets Index gained 0.9 percent to 1,153.18 at 4:30 p.m. in New York, taking its increase for the week to 1.6 percent. Today’s rally erased the gauge’s losses for the year. Brazil’s Bovespa index recorded its first weekly gain in three, and India’s Sensex rose 1.6 percent, completing a 0.9 percent weekly advance. Thailand’s SET Index climbed to the highest since August 1996 and the Hang Seng China Enterprises Index jumped 2.2 percent. The South Korea’s Kospi Index rose 1.2 percent.

Euro-area leaders announced 159 billion euros ($229 billion) in new aid for Greece late yesterday and eased the terms of loans for cash-strapped nations. Leaders declined to increase the 440 billion-euro bailout fund, prompting economists from Citigroup Inc. to Goldman Sachs Group Inc. to question whether it’s big enough to insulate Spain and Italy from contagion.

“There are still some question marks out there, but this is certainly a helpful move,” said John Lomax, an emerging- markets strategist at HSBC Holdings Plc, in a phone interview from London. “We have continued uncertainty about the Italian outlook, and the question is, once people become uncertain about that, does it become relatively more difficult to address.”

European leaders will likely take further actions if “it turns out this isn’t enough,” Lomax said.

China Advances

The Shanghai Composite Index advanced for the first day in five as the improving outlook for Europe’s economy helped drive oil prices higher for a fourth day. Samsung Electronics Co., which gets about a fifth of its revenue from Europe, rose 1 percent.

“The European debt crisis seems to have made a little bit of progress, which is positive,” Pu Yonghao, the Hong Kong- based chief investment strategist for Asia Pacific at UBS AG’s wealth management unit, said in a Bloomberg Television interview today.

Turkey’s ISE National 100 Index of equities retreated 1.8 percent in its longest losing streak since September 2008. Earlier this week, Fitch Ratings said Turkey’s record current- account deficit is causing “uncertainty” on its outlook for an investment-grade rating.

Fund Flows

Developing-nation equity funds reported withdrawals of $1.1 billion in the week ended July 20, snapping three straight weeks of net inflows, Citigroup Inc. said in a report today. Citigroup expects emerging equities to “pick up steam” in the second half of 2011 and eventually outperform developed market equities for the full year, analysts led by Geoffrey Dennis wrote in a separate report.

Infosys Ltd., India’s second-biggest software maker, gained 2.2 percent. The country’s largest software companies get about a quarter of their orders from Europe.

Oil rose as signs that Europe and the U.S. will contain their debt crises eased speculation that demand for raw materials may falter. Crude for September delivery advanced 0.8 percent to settle at $99.87 a barrel on the New York Mercantile Exchange.

Thailand’s stock benchmark index, the world’s second-best performer in the past month, reached a 15-year high as a peaceful transition of power following the July 3 election drew overseas investors. Kasikornbank Pcl, the third-largest lender by assets, jumped 6.3 percent to a record on expectations that economic expansion and new government policies will fuel earnings growth.

--Editors: Richard Richtmyer, Glenn J. Kalinoski

To contact the reporters on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net; Namitha Jagadeesh in London at njagadeesh@bloomberg.net; Leon Lazaroff in New York at llazaroff@bloomberg.net

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


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