Bloomberg News

Emerging Market Stocks Gain, Paring Weekly Loss, on Europe Talks

October 21, 2011

Oct. 21 (Bloomberg) -- Emerging-market stocks advanced, trimming a weekly drop, on speculation of an agreement to contain Europe’s debt crisis as investors awaited the outcome of summits starting during the weekend.

The MSCI Emerging Markets Index climbed 1.4 percent to 920.07 at the close of trading, paring a decline this week to 1.6 percent. South Korea’s Kospi Index added 1.8 percent as builders and technology shares rallied, while Russia’s Micex Index gained 2 percent. The benchmark measure in Brazil ended the week with a gain after rising 2.3 percent today. Gauges also advanced in Poland and South Africa. The Shanghai Composite Index retreated 0.6 percent.

Euro-area leaders will meet twice next week to discuss their response to the debt crisis, including a plan to provide $1.3 trillion. France retreated in a clash with Germany over how to expand the power of Europe’s bailout fund in the first meeting of a six-day marathon intended to stave off a Greek default and shield banks from the fallout.

“There appear to be some issues on which agreement is likely,” Julian Callow, head of euro economics at Barclays Capital in London, said in a research note today. “The precise form of any agreement on how to maximize the degree of support offered” by the rescue funds remains unclear, he said.

France’s view that the fund, the European Financial Stability Facility, should get a banking license enabling it to borrow from the European Central Bank, “is not a definitive point of discussion for us,” French Finance Minister Francois Baroin said today in Brussels. “What matters is what works.” The French flexibility indicated progress toward easing the threat to the global economy stemming from Greece.

Currencies Gain

South Africa’s rand surged 1.8 percent versus the dollar, the most among 25 emerging-economy currencies tracked by Bloomberg. The forint followed with a 1.4 percent gain. The ruble strengthened 1.3 percent as oil rose in New York. The lira gained by the same degree in Turkey, where the central bank boosted overnight lending rates yesterday. Brazil’s real and the Mexican peso also appreciated against the U.S. dollar.

Emerging-market stock funds took in $665 million in the week ended Oct. 19, snapping 11 straight weeks of outflows, according to Citigroup Inc.

Diversified global developing-nation equity funds got $1.3 billion, Markus Rosgen, Citigroup’s Hong Kong-based chief Asian strategist, wrote in a report today. That helped offset withdrawals from regional funds, including outflows of $133 million from Asia excluding Japan, the analyst said, citing data compiled by fund researcher EPFR Global.

The Bovespa Index posted a second weekly advance. A commodities rally spurred by prospects for a deal to contain the euro-zone crisis lifted Brazilian producers.

Brazil, Mexico Stocks

Vale SA climbed 1.8 percent and MMX Mineracao & Metalicos SA leaped 3.6 percent. Oil companies Petroleo Brasileiro SA and OGX Petroleo & Gas Participacoes SA followed crude prices higher.

In Mexico, retailers and homebuilders advanced after the national statistics agency said the nation’s unemployment rate fell to 5.68 percent in September from 5.79 percent in August. Desarrolladora Homex SAB, Mexico’s largest homebuilder, advanced 1.9 percent.

BHP Billiton Plc, the world’s largest mining company, jumped 4.3 percent in South Africa as metals prices advanced in London. The FTSE/JSE Africa All Share Index gained 2 percent.

The WIG20 Index leaped 3.8 percent in Warsaw and Turkey’s XU100 gauge climbed 1.6 percent.

In Seoul, Daewoo Engineering & Construction Co. climbed 7.8 percent, leading Korean builders higher on speculation they will gain from a potential increase in reconstruction work in Libya.

Hynix

Hynix Semiconductor Inc., the world’s second-largest computer-memory chipmaker, jumped 10 percent after research company IHS iSuppli said Apple Inc. used the company’s NAND- flash chips in the iPhone for the first time.

Vietnam’s VN Index rallied 1.8 percent on speculation inflation may slow after prices eased in the country’s biggest cities. Month-on-month inflation in the Vietnamese capital Hanoi and in Ho Chi Minh City, the nation’s biggest city, slowed in October, the government said in a statement posted late yesterday on its website.

The Bombay Stock Exchange Sensitive Index, or Sensex, slid 0.9 percent.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries slid 9 basis points, or 0.09 percentage point, to 406, 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 fell nine basis points to 311, according to data provider CMA.

--With assistance from Saeromi Shin in Seoul. Editors: Linda Shen, Ana Monteiro

To contact the reporters on this story: Belinda Cao in New York at lcao4@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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