Bloomberg News

Emerging-Market Stocks Gain as Economies in India, Poland Grow

August 30, 2011

Aug. 30 (Bloomberg) -- Emerging-market stocks rose for a third day as economies in India and Poland grew more quickly than expected, and the Federal Reserve said some policy makers wanted to take more action to stimulate the economy.

The MSCI Emerging Markets Index advanced 0.9 percent to 1,013.68 at 5:35 p.m. New York time, the highest in two weeks. Brazil’s Bovespa Index and Chile’s Ipsa Index both rose to a four-week high after a three-day increase. India’s benchmark jumped 1.6 percent, posting the biggest two-day advance in two years. Poland WIG20 Index advanced 1.7 percent and South Korea’s Kospi Index increased 0.8 percent.

The three-day gain helped MSCI’s emerging-market gauge pare its monthly loss to 12 percent. India’s economy expanded 7.7 percent in the quarter ended June 30, and Poland grew 4.3 percent, reports showed today.

The Fed’s minutes released today showed that a few members “felt that recent economic developments justified a more substantial move” beyond the pledge adopted at the Aug. 9 meeting of the Federal Open Market Committee to hold its key interest rate at a record low until mid-2013.

“Stocks have been oversold, so any positive data point will tend to lift the markets,” said Gopal Agrawal, chief investment officer at the Indian unit of Mirae Asset Financial Group in Mumbai. A speech by Fed Chairman Ben S. Bernanke in Jackson Hole, Wyoming, last week “was, in many ways, better than what people had anticipated as it clearly showed he is more optimistic about long-term prospects for the U.S.,” he said.

Index Valuations

Developing countries’ equities have trailed their developed-nation counterparts this year, with the MSCI emerging- market index on course for its biggest monthly retreat since October 2008. The MSCI World Index has lost 7.8 percent in August. Emerging-market shares trade at 10.5 times estimated earnings, less than 12.7 times for the MSCI World Index, according to data compiled by Bloomberg.

India’s GDP data compares with growth of 7.8 percent the previous quarter and beat the median forecast of a 7.6 percent increase by economists surveyed by Bloomberg.

Reliance Industries Ltd., owner of the world’s largest oil- refining complex, jumped 3.6 percent.

Brazilian wholesale, construction and consumer prices, as measured by the IGP-M price index, gained for the first time in three months in August, rising 0.44 percent, compared with a 0.12 percent decline in July, the Getulio Vargas Foundation said.

B2W Cia. Global do Varejo, the nation’s largest online retailer, jumped 4.8 percent, leading gains in the benchmark gauge. PDG Realty SA Empreendimentos & Participacoes, Brazil’s biggest homebuilder by revenue, gained after it was raised to “buy” at Banco BTG Pactual SA.

Miners

Brazil’s Vale SA and Cap SA, Chile’s largest steel producer and iron miner, both rose as base metal prices gained.

Bernanke said in his Aug. 26 speech that a second day has been added to the next Fed meeting in September to “allow a fuller discussion” of the economy and possible policy responses.

Confidence among U.S. consumers plunged to the lowest level in more than two years as Americans’ outlooks for employment and incomes soured. The Conference Board’s index slumped to 44.5, the weakest since April 2009, from a revised 59.2 reading in July, figures from the New York-based private research group showed today.

The global economic crisis is leading to a possible “developed economy” recession in the U.S. and Europe, which may be hard to alleviate, according to Pacific Investment Management Co.’s Bill Gross.

Pimco

In this environment, the world’s biggest manager of bond funds favors investing in Australia, Mexico, Brazil and Canada, along with non-dollar currencies that have strong ties to the Asian continent, Gross, co-chief investment officer and founder of Pimco, wrote in a monthly investment commentary published on the company’s website today.

KGHM Polska Miedz SA, Poland’s largest copper producer, jumped 3.3 percent. The country’s economic expansion beat the 4.2 percent median estimate of 30 economists surveyed by Bloomberg. PBG SA, the nation’s third-largest builder, jumped 5 percent after earnings surpassed estimates.

The Hang Seng China Enterprises Index of Chinese companies’ so-called H shares jumped 2.2 percent.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose three basis points, or 0.03 percentage point, to 366, according to JPMorgan Chase & Co.’s EMBI Global Index. The Markit iTraxx SOVX CEEMEA Index of credit-default swaps for emerging Europe, the Middle East and Africa fell nine basis points to 259, according to CMA in London.

Markets in Turkey, Indonesia, Malaysia and the Philippines were closed for public holidays.

--With assistance from Belinda Cao and Tal Barak Harif in New York. Editors: Linda Shen, Stephen Kirkland

To contact the reporters on this story: Shikhar Balwani in Mumbai at sbalwani@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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