Bloomberg News

Emerging Stocks Rebound From Biggest Loss in Two Weeks on Europe

October 19, 2011

Oct. 19 (Bloomberg) -- Emerging-market stocks rebounded from the biggest loss in two weeks amid speculation European leaders are moving closer to forming a plan to resolve the region’s debt crisis, and after U.S. housing starts data exceeded estimates.

The MSCI Emerging Markets Index rose 0.8 percent to 932.95 at the close of trading. India’s Sensex Index jumped 2 percent while the Hang Seng China Enterprises Index of Chinese shares traded in Hong Kong gained 1.2 percent as Industrial & Commercial Bank of China Ltd. led lenders higher. The BUX Index rose 0.4 percent in Budapest and South Africa’s benchmark gained 0.5 percent. Benchmark gauges in Poland, Chile and Argentina advanced while those in Brazil and Mexico dropped.

Euro-area leaders assembled in Frankfurt seeking to narrow divisions to solve the sovereign debt crisis. While German Chancellor Angela Merkel this week sought to lower expectations that the crisis-fighting effort would climax at the Oct. 23 summit in Brussels, Group of 20 finance chiefs last week set the meeting as a deadline for action. U.S. Commerce Department data showed housing starts jumped 15 percent.

“Some optimism is building up that Europe’s leaders will arrive at an agreement and resolve the crisis and that we will see some surprises in third-quarter earnings,” said Jonathan Ravelas, chief market strategist at Manila-based Banco de Oro Unibank Inc. “Still, it’s not the time to buy across the board since the risks remain unresolved.”

U.S. Housing

The MSCI emerging-market index sank 1.7 percent yesterday, snapping a nine-day rally after China’s economy grew at the slowest pace in two years and Steffen Seibert, spokesman for German Chancellor Merkel, said European leaders won’t provide a quick end to the debt crisis. Germany and France agreed to boost the region’s rescue fund to 2 trillion euros ($2.75 trillion), the Guardian reported yesterday.

The 658,000 housing starts for September in the U.S. was more than a 590,000 median estimate by economists surveyed by Bloomberg.

Intel Corp., the world’s largest chipmaker, forecast fourth-quarter sales that topped some analyst predictions. Morgan Stanley, owner of the world’s largest brokerage, said third-quarter net income was $2.2 billion, compared with $131 million a year earlier. Yahoo! Inc. gained 3 percent as demand for advertising helped third-quarter profit top analysts’ forecasts, while Apple Inc.’s earnings missed estimates for the first time in at least six years.

Argentina, Chile

Argentina’s Merval Index rose for the sixth day in seven. Chile’s Ipsa index has gained for three days in a row to a one- month high.

Gafisa SA, Brazil’s third-biggest homebuilder by revenue, soared 4.2 percent after it said third-quarter contracted sales increased 2.6 percent from a year earlier.

The BUX index gained 0.4 percent in Hungary while Poland’s WIG20 measure added 0.3 percent in its second day of increases.

The won strengthened 1.2 percent versus the dollar, the most among 25 emerging currencies tracked by Bloomberg, after South Korea agreed to increase a currency-swap accord with Japan to $70 billion. The ruble rose 0.7 percent while the Indian rupee gained 0.3 percent. The real weakened 1.1 percent and the rand fell 0.9 percent against the dollar.

The ISE National 100 Index fell 1.6 percent in Turkey, as Turkiye Garanti Bankasi AS, the country’s biggest bank by market value, slid 2.6 percent. Anadolu Efes Biracilik & Malt Sanayii AS surged 6.8 percent in Istanbul after an announcement that SABMiller Plc will get a 24 percent stake in the Middle East’s biggest brewer, in return for its Russian and Ukrainian businesses.

ICBC

ICBC, as the world’s biggest lender by market value is known, rallied 2 percent in Hong Kong as a drop in money-market rates signaled China’s central bank will inject more funds into the financial system. The seven-day repurchase rate, a gauge of funding availability in the financial system, fell 16 basis points, or 0.16 percentage point, to 3.32 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.

The Shanghai Composite Index slipped 0.3 percent. The Ministry of Commerce said today foreign investments gained 7.9 percent in September to $9 billion. That compares with an expansion of 11.1 percent in August and 19.8 percent in July.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries retreated five basis points, or 0.05 percentage point, to 408, 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 declined three basis points to 301, according to data provider CMA.

--With assistance from Irene Shen in Shanghai and Ian Sayson in Manila. Editors: Marie-France Han, Glenn J. Kalinoski

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: Darren Boey at dboey@bloomberg.net


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