Bloomberg News

Emerging-Market Stocks Gain to Five-Week High on Commodity Rally

October 25, 2011

Oct. 25 (Bloomberg) -- Emerging-market stocks climbed, with the benchmark index reaching a five-week high, as steeper energy prices boosted producers.

The MSCI Emerging Markets Index rose for a third day, adding 0.6 percent at 4:30 p.m. in New York to 955.28, led by gains in Asia. The Hang Seng China Enterprises Index of Chinese shares traded in Hong Kong advanced 1.5 percent. The MSCI index pared gains as Brazil’s Bovespa dropped 1.1 percent, retreating from a five-week high, while Chile’s benchmark fell 1.4 percent.

European leaders will hold a summit on the region’s debt crisis tomorrow as they seek to bolster a rescue fund, recapitalize banks and provide debt relief to Greece. The cancellation of tomorrow’s meeting of European Union finance ministers spurred concern that the region’s leaders will fail to produce agreements on how to tame the debt crisis.

“The EU debt crisis is in the focus of all investors,” Daniel Lenz, a Frankfurt-based analyst for emerging markets at DZ Bank AG, said in a phone interview. “The general economic outlook is deteriorating, but the environment and momentum for emerging markets is still rather positive. It’s not that bad as one may have thought a couple of months ago.”

European policy makers are negotiating 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.

Europe must “deliver on the commitments they’ve made,” U.S. Treasury Secretary Timothy F. Geithner said in Wilmington, North Carolina.

‘Sense of Urgency’

“They’re saying a lot of the right things and they’re clearly working on it and they’re moving with a greater sense of urgency,” he said. “That’s all welcome, but until we see what they come together with, it’s a little hard to evaluate.”

Poland’s benchmark WIG20 index fell 0.9 percent, Hungary’s BUX Index gained 0.4 percent to a six-week high and the Czech PX Index advanced 0.5 percent to an almost three-week high.

Turkey’s lira strengthened 1.1 percent as 12 of 25 emerging-market currencies tracked by Bloomberg gained.

The unemployment rate in Poland stayed at 11.8 percent in September after the previous month’s rate was revised higher, a report today showed. A report yesterday showed Hungary’s economic-sentiment index slid for a sixth month to the lowest in almost two years.

Turkey’s benchmark share index was little changed, while Russia’s Micex retreated 1.4 percent. AngloGold Ashanti Ltd., Africa’s biggest producer of the metal, gained in Johannesburg as gold increased for a third day.

Year to Date

The MSCI emerging-market gauge has fallen 17 percent this year, compared with a 6.6 percent drop in the MSCI World Index, as faster inflation in China, India and Brazil prompted policy makers to raise interest rates, curbing economic growth. Shares on the developing nations gauge trade at 10.6 times earnings, compared with a four-year average of 14.2 times, according to data compiled by Bloomberg.

Cnooc Ltd., China’s biggest offshore oil producer, climbed for a third day in Hong Kong, providing the biggest boost to MSCI’s emerging-market index. PTT Pcl, Thailand’s largest energy company, rallied 4.6 percent in Bangkok and its oil unit PTT Exploration & Production Pcl rose 2.6 percent.

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, rose 0.8 percent in Sao Paulo as crude-oil futures advanced 1.4 percent to $92.53 a barrel in New York.

Brazil, India

Vanguarda Agro SA, a farm company backed by Spanish billionaire Enrique Banuelos, declined 3.2 percent in Sao Paulo after Chief Executive Officer Bento do Amaral Peixoto Moreira said it may sell new shares or bonds. Cia. Energetica de Minas Gerais, the power company known as Cemig, plunged 3 percent after it bid for a 21 percent stake in EDP Energias de Portugal that the Portuguese government is selling.

The BSE India Sensitive Index gained 1.9 percent after the Reserve Bank of India signaled it’s nearing the end of its record cycle of rate increases, even as it raised the repurchase rate for a 13th time since the start of 2010.

Indian banks fell, with HDFC Bank Ltd. dropping 3.4 percent and State Bank of India, the nation’s largest lender, retreated 3.6 percent.

In Seoul, Honam Petrochemical Corp. declined 5.3 percent. HMC Investment Securities Co. and KTB Investment & Securities Co. reduced their share-price estimates, citing a reduced earnings outlook at the South Korean petrochemical company.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose 4 basis points, 0.04 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 rose six basis points to 302, according to data provider CMA.

--With assistance from Krystof Chamonikolas in Prague and Berni Moestafa in Jakarta. Editors: Brendan Walsh, Richard Richtmyer

To contact the reporters on this story: Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net; Ksenia Galouchko in New York at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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