Bloomberg News

Emerging Stocks Rise Most in Week; Russia, Brazil Shares Gain

October 06, 2011

Oct. 6 (Bloomberg) -- Emerging-market stocks rose, driving the benchmark index to its biggest gain in a week, after U.S. unemployment claims rose less than forecast and as optimism grew Europe will step up measures to contain its debt crisis.

The MSCI Emerging Markets Index climbed 3.3 percent to 864.08 as of 4:30 p.m. in New York, its biggest advance since Sept. 27. Brazil’s Bovespa Index jumped the most in a month while Chile’s benchmark surged the most in two months. The Kospi Index in South Korea rose 2.6 percent. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong rose 5.8 percent and the Micex Index added 4.2 percent in Moscow.

Reports of jobless claims at a level that shows the pace of dismissals may be slowing and rising fuel demand eased concern the U.S. economic recovery is in jeopardy. The European Central Bank said today it will resume covered-bond purchases and reintroduce yearlong loans for banks as the sovereign debt crisis threatens to lock money markets.

“The market is reacting positively to all this news and sentiment is slightly better now,” Choo Swee Kee, who manages about $220 million as chief investment officer of TA Investment Management Bhd., said in a phone interview from Kuala Lumpur. “The European authorities are trying whatever measures to save their economy with as little cost as possible.”

A two-day gain helped cut the losses in the MSCI emerging market gauge this month to 1.9 percent, compared with a 1.8 percent increase in the MSCI World Index. Stocks in the emerging-market gauge are traded at 9.8 times trailing earnings, versus 12 for equities in developed nations.

Brazil, Eastern European Stocks

In Brazil, oil producer Petroleo Brasileiro SA advanced 3.5 percent and miner Vale SA, the benchmark index’s heaviest- weighted stocks, added 1.6 percent, as improving outlook for Europe’s banking industry and the U.S. employment data buoyed commodity prices.

OAO Lukoil, Russia’s second-biggest oil producer, rose 2.6 percent and KGHM Polska Miedz SA, Poland’s only copper producer, rallied 6.6 percent as the WIG20 Index increased 1.3 percent in Warsaw. BHP Billiton Ltd., the world’s largest mining company, gained 3.2 percent in Johannesburg, helping drive up the FTSE/JSE Africa All Share Index by 1.4 percent.

Lan Airlines SA, Latin America’s largest airline by market value jumped 4.4 percent in Chilean trading after Spain’s antitrust regulator approved without conditions its planned acquisition of Brazil’s TAM SA, which climbed 2.1 percent in Sao Paulo.

Emerging-Market Currencies

The Brazilian real strengthened 2.9 percent versus the dollar, the best performance among 25 emerging-market currencies tracked by Bloomberg. The Chilean peso followed with a 2.1 percent gain. The Turkish lira appreciated 1.2 percent against the dollar after the central bank sold $1.1 billion in two days of record-breaking auctions, depleting reserves in an attempt to stem the currency’s slide.

European Central Bank President Jean-Claude Trichet said the ECB will resume covered-bond purchases and reintroduce year- long loans for banks as the sovereign debt crisis threatens to lock money markets.

The ECB will spend 40 billion euros ($54 billion) on covered bonds starting next month and will offer banks two additional unlimited loans of 12 and 13-month durations, Trichet said at a press conference in Berlin today after policy makers left the benchmark interest rate at 1.5 percent.

The Markit iTraxx SovX CEEMEA Index of eastern European, Middle East and Africa credit-default swaps fell 16 basis points to 337.

Samsung, LG

Samsung Electronics Co., the world’s second-largest maker of mobile phones, rose 1.5 percent and LG Electronics Inc., the third-biggest, jumped 6.3 percent in Seoul, on speculation they will gain market share from Apple Inc., whose former Chief Executive Officer Steve Jobs died.

Hong Kong-listed Chinese property stocks surged after Deutsche Bank AG said it sees “emerging” value in developers. Agile Property Holdings Ltd. climbed 20 percent in Hong Kong trading. The stock has sunk 60 percent over the past six months. China Overseas Land & Investment Ltd., the biggest Chinese developer listed in Hong Kong, climbed 17 percent.

Markets in mainland China and India were shut today.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell 19 basis points, or 0.19 percentage point, to 458, according to JPMorgan Chase & Co.’s EMBI Global Index.

--With assistance from Belinda Cao and Tal Barak Harif in New York, Saeromi Shin in Seoul and Marco Lui in Hong Kong. Editors: Brendan Walsh, Marie-France Han, Richard Richtmyer

To contact the reporters on this story: Chan Tien Hin in Kuala Lumpur at thchan@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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