Bloomberg News

Emerging Stocks Rise 5th Day on Europe Debt Pledge, China Banks

October 11, 2011

Oct. 11 (Bloomberg) -- Emerging-market stocks advanced, driving the benchmark index to its steepest five-day gain in more than two years, on speculation Europe will stem its debt crisis and as a Chinese state investment fund bought shares in four banks.

The MSCI Emerging Markets Index climbed 1.2 percent to 909.43 at the close of trading, bringing the five-day jump to 9.4 percent. A rally in lenders helped the Hang Seng China Enterprise Index of Chinese companies traded in Hong Kong to a 4.4 percent gain. The Taiex Index surged 2.6 percent after a holiday in Taiwan yesterday and Brazil’s Bovespa climbed to the highest level in two weeks. The Micex Index retreated 1.2 percent in Moscow after jumping 9.1 percent in the preceding three sessions.

MSCI’s developing-nation gauge posted the sharpest five-day gain since July 2009 after German Chancellor Angela Merkel and French President Nicolas Sarkozy pledged over the weekend to deliver a plan to recapitalize Europe’s banks and address Greece’s debt crisis by Nov. 3. Agricultural Bank of China Ltd. led gains among the nation’s biggest lenders after Central Huijin Investment Ltd. started buying their shares.

“What we’re starting to see is a more coordinated response to this global problem,” Philip Poole, head of macro and investments strategy at HSBC Global Asset Management, said in an interview in Hong Kong. “Europeans finally have started to get their act together, the Fed and central banks provided dollar swap facilities, and the Chinese are helping with sentiment by addressing this issue in the banks.”

Slovak Vote

Slovak lawmakers failed to approve an overhaul of Europe’s bailout fund today, but Finance Minister Ivan Miklos said the revamped fund will likely be passed in a separate vote later this week.

European Union and International Monetary Fund officials indicated Greece will get an 8 billion-euro ($11 billion) loan next month under a 110 billion-euro bailout, as European leaders move to reopen talks on a new package that may mean deeper writedowns on Greek debt.

The team of officials from the EU, IMF and European Central Bank said Greece has made “important progress” in fiscal consolidation, according to a statement today upon completion of a review in Athens. The mission warned that more spending cuts would be needed in 2013 and 2014 to meet deficit targets.

Fed Minutes

The Federal Reserve will release minutes of its September meeting tomorrow, after Chairman Ben S. Bernanke said on Oct. 4 the U.S. central bank is prepared to take further action to promote a stronger economic recovery.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries plunged 22 basis points, or 0.22 percentage point, to 428, according to JPMorgan Chase & Co.’s EMBI Global Index.

The spread between U.S. and Polish debt fell 29 basis points, the biggest drop in 10 months following Prime Minister Donald Tusk’s election victory.

Most emerging-market currencies weakened against the dollar, led by the Mexican peso, which dropped 1.2 percent. The rand followed with a 1.1 percent decline as metal prices fell. India’s rupee fell 0.7 percent while the lira slid 0.6 percent. The forint depreciated 0.8 percent versus the euro.

Agricultural Bank climbed 13 percent in Hong Kong after earlier gaining as much as 16 percent, an intraday record. Central Huijin, the arm of China’s sovereign wealth fund, said it began buying shares yesterday in the nation’s four biggest banks. Shares of Industrial & Commercial Bank of China Ltd., Bank of China Ltd. and China Construction Bank Corp. also surged.

Macau Casinos

Jim Chanos, founder of New York-based hedge fund Kynikos Associates, said he has kept holdings in casinos in the former Portuguese colony of Macau for 1 1/2 years, citing their growth and more credible financial figures.

Oil futures for November delivery gained 0.5 percent in its fifth day of increase in New York, capping the longest rally this year.

The Bovespa rose 1.1 percent in Sao Paulo, led by OGX Petroleo & Gas Participacoes SA, which advanced 3.1 percent after billionaire Eike Batista increased his stake to 62.5 percent from 61 percent. Mexico’s IPC index rose 0.4 percent to the highest in more than a week.

Largan Precision Industry Co. climbed 6.9 percent in Taipei after its customer Apple Inc. received more than a million preorders for the iPhone 4S in a single day, putting the Cupertino, California-based company on a record-setting pace ahead of the device’s Oct. 14 release.

South Korea’s Kospi Index rose 1.6 percent to the highest in more than two weeks.

The Markit iTraxx SovX CEEMEA Index of eastern European, Middle East and Africa credit-default swaps declined four basis points to 321.

--With assistance from Tal Barak Harif in New York and Jason Webb in London. Editor: Marie-France Han

To contact the reporters on this story: Ian Sayson in Manila at isayson@bloomberg.net; Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: Shiyin Chen at schen37@bloomberg.net


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