Bloomberg News

Emerging-Market Stocks Post Weekly Advance on G-20, U.S. Sales

October 14, 2011

Oct. 14 (Bloomberg) -- Emerging-market stocks rose, with the benchmark posting its biggest weekly gain in more than two years, as Group of 20 finance ministers met to discuss Europe’s debt crisis and growth in U.S. retail sales exceeded forecasts.

The MSCI Emerging Markets Index gained 0.5 percent to 935.50 at the close of trading, pushing the weekly advance to 5.8 percent, the most since July 2009. Brazil’s Bovespa Index and Mexico’s IPC Index each climbed 0.8 percent with weekly jumps that were the most on two years. The Micex Index rose 3.1 percent in Moscow. India’s Sensex Index climbed 1.2 percent. Benchmark gauges also moved higher in Argentina, Colombia, South Africa and Turkey.

European officials are outlining a rescue plan that may include deeper investor losses on Greek bonds, higher bank capital levels and increased firepower for bailouts. The package helped counter concern the region’s debt crisis will worsen after credit downgrades of Spain and some Europe’s banks. Retails sales in the U.S. rose 1.1 percent in September, the biggest since February. That compared with a 0.7 percent increase forecast by economists surveyed by Bloomberg.

“The market is really reassured because it looks like they are doing something to address the European debt crisis,” Bruce Bower, a partner at Moscow-based hedge fund Verno Capital, said by phone. “We were falling before because of the fear that nothing was going to be done.”

Withdrawals Slow

European officials are considering writedowns of as much as 50 percent on Greek bonds, people familiar with the discussions said. The losses may be accompanied by a pledge to rule out debt restructurings in other countries that received bailouts, such as Portugal, to persuade investors that Europe has mastered the crisis, said the people, who declined to be identified because the negotiations will run for another week.

Emerging-market stocks advanced this week amid speculation policy makers around the world will step up efforts to prevent a global recession. Withdrawals from developing-nation stock funds slowed to $905 million in the week ended Oct. 12, the smallest outflows in more than a month, Citigroup analyst Markus Rosgen said in a report today, citing figures compiled by EPFR Global.

Ten of 13 major U.S. sales categories showed increases last month, led by auto dealers and clothing stores, according to the Commerce Department report today.

“The key messages here are that spending is holding up quite well,” Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York, wrote in a research note.

Corporacion GEO SAB, Mexico’s second-largest homebuilder, jumped 6.2 percent in Mexico City. Preliminary third-quarter sales were between 1.52 billion pesos ($114.8 million) and 1.56 billion pesos, the company said in a statement to the nation’s stock exchange. Hypermarcas SA, a Brazilian consumer-products company, soared 4.9 percent, the most since Aug. 23.

Gazprom, Billiton

OAO Gazprom, the world’s biggest natural gas company, rose 2.9 percent in Moscow. Crude oil futures added 3.1 percent to a three-week high of $86.80 a barrel in New York.

BHP Billiton Plc, the largest global miner, advanced 3 percent in Johannesburg as copper rose.

Most currencies in emerging economies strengthened against the dollar. The real appreciated 1.1 percent and the Mexican peso gained 1.4 percent. The ruble climbed 1.1 percent to its strongest level in almost a month. The rand and the Polish zloty both advanced 0.6 percent.

The Hang Seng China Enterprises Index of Chinese shares traded in Hong Kong fell 2.2 percent.

China Inflation

China’s consumer prices rose 6.1 percent in September from a year earlier, the fourth month in a row with inflation over 6 percent and compared with a 4 percent goal, according to the nation’s statistics bureau. Money supply grew at the slowest pace in almost a decade as inflation stayed above the government’s target, highlighting the risk that efforts to tame prices will trigger a slowdown.

Industrial & Commercial Bank of China Ltd., the nation’s biggest lender by value, dropped 4.3 percent in Hong Kong.

The BSE India Sensitive Index, or Sensex, added 1.2 percent on expectations corporate earnings will withstand a global downturn.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries plunged 15 basis points, or 0.15 percentage point, to 403, 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 dropped 3 basis points to 306, according to data provider CMA.

--With assistance from Alex Nicholson and Jason Corcoran in Moscow and Berni Moestafa in Jakarta. Editor: Marie-France Han, Richard Richtmyer

To contact the reporters on this story: Jason Webb in London at jwebb25@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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