Bloomberg News

Emerging Stocks Rise to Highest in 5 Weeks on Commodities’ Gain

October 24, 2011

Oct. 24 (Bloomberg) -- Emerging-market stocks gained, sending the benchmark index toward its highest level in more than a month, as commodities rallied after a report showed Chinese manufacturing may expand in October.

The MSCI Emerging Markets Index added 3.2 percent to 949.39 as of 4:30 p.m. in New York, the highest since Sept. 20. The Hang Seng China Enterprises Index of Chinese shares traded in Hong Kong rose 5.4 percent, while Brazil’s Bovespa surged 3 percent to its highest level in five weeks. All 25 developing- nation currencies tracked by Bloomberg gained against the dollar except for Argentina’s peso, led by South Africa’s rand and Russia’s ruble.

OAO Novolipetsk Steel, billionaire Vladimir Lisin’s steelmaker, surged 10 percent in Moscow as the Standard & Poor’s GSCI index of 24 raw materials advanced to a five-week high. Vale SA, the world’s largest iron-ore producer, followed metal prices higher and gained 5.9 percent in Sao Paulo. A preliminary index of purchasing managers showed that China’s manufacturing may grow in October for the first time in four months, a signal demand for commodities may withstand the global slowdown.

“It’s a positive read on the global economic picture, and China is very important to that respect,” said Geoffrey Pazzanese, fund manager at Federated Investors Inc. in New York. “Materials’, industrials’ bounce today has more to do with the viewpoint that China is going to continue to grow.”

European Progress

European leaders made progress in debt-crisis talks over the weekend. Work on assisting European banks is “going well,” French President Nicolas Sarkozy said in Brussels yesterday. Leaders are still jousting with banks over the size of losses they take on Greek bonds while deliberating over leveraging the fund after ruling out tapping the European Central Bank’s balance sheet.

“The market is piecing together some of the commentaries and press reports around the summit and has, so far, come to the conclusion that a solution is taking place,” Guillaume Salomon and Nalini Cundapen, London-based analysts at Societe Generale SA, wrote in e-mailed comments.

MSCI’s emerging-market index has slumped 18 percent this year, more than the 5.3 percent decline in the MSCI World Index of developed nations. The emerging-market gauge is valued at 10.1 times estimated profit, compared with 13.4 times at the end of 2010, according to data compiled by Bloomberg.

Currencies Rise

All but one emerging-market currency rose against the dollar. The Mexican peso surged 2.3 percent while the rand advanced to its strongest level in a week, climbing 2.1 percent. Turkey’s lira rose for a third day after the central bank said it would announce measures to “significantly” strengthen the currency in two days’ time. Chile’s peso gained for a second day as copper surged.

Poland’s WIG20 rose 2.8 percent. Russia’s benchmark Micex index increased 2.5 percent as oil in New York rallied for the second day on speculation Europe will solve its debt crisis.

The slowdown in emerging market economies has been moderate so far, Nouriel Roubini, co-founder and chairman of Roubini Global Economics LLC, said in a speech in Jakarta today, adding that such economies are strong and resilient.

China’s preliminary manufacturing index, known as the Flash PMI, was at 51.1, the highest in five months, HSBC Holdings Plc and Markit Economics said today. A reading above 50 indicates expansion.

Zinc jumped 3.9 percent, copper rallied 7 percent and aluminum advanced 4.4 percent. China is the biggest buyer of industrial metals.

Eletrobras, Minera Frisco

Minera Frisco SAB, the mining company controlled by Mexican billionaire Carlos Slim, was among the biggest gainers in Mexico City, climbing 3.7 percent. Mexichem SAB, the largest maker of plastic pipes in Latin America, rose 1.6 percent.

Centrais Eletricas Brasileiras SA, Latin America’s largest publicly traded power company, gained 2.8 percent in Sao Paulo after it bid for the 21 percent stake in EDP Energias de Portugal being sold by the Portuguese government.

Turkey’s benchmark stock index, the ISE National 100 Index, fell 0.9 percent in Istanbul, led by a retreat by banks after the central bank moved to reduce the amount of liquidity it provides to the market, increasing demand for a special funding facility.

Mardin Cimento Sanayii & Ticaret AS, a cement maker, climbed as much as 11 percent on speculation demand for the building material will rise after an earthquake struck southeast Turkey yesterday.

Turkey Death Toll

The earthquake flattened apartment buildings in the Van region near the Iranian border and may have damaged as many as 4,000 homes, government officials said. The death toll climbed to 279 people and as many as 1,000 people may have died, officials said.

Industrial & Commercial Bank of China Ltd. led gains among Chinese lenders after Barclays Plc. said it expected the nation’s banks to report “strong” profit growth in the third quarter. ICBC, the world’s largest bank by market value, added 5.8 percent in Hong Kong, while China Construction Bank Corp. gained 4.1 percent.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell ten basis points, or 0.1 percentage point, to 399, 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 increased eight basis points to 307, according to data provider CMA.

--With assistance from Ksenia Galouchko in New York. Editors: Brendan Walsh, Marie-France Han


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