Bloomberg News

Emerging Stocks Rise on China Lending, Europe Debt Speculation

November 15, 2011

Nov. 14 (Bloomberg) -- Emerging-market stocks rose, driving the benchmark index to its biggest two-day gain in two weeks, on speculation China is relaxing lending curbs and new governments in Greece and Italy will help contain Europe’s debt crisis.

The MSCI Emerging Markets Index climbed 0.8 percent to 978.51 as of 11:14 a.m. in London, taking its two-day increase to 2.6 percent. South Korea’s Kospi Index and Taiwan’s Taiex Index rose more than 2 percent. Poland’s gauge climbed as much as 3.2 percent following a holiday on Nov. 11. Markets in Turkey, South Africa and Russia also gained today.

“The mood seems to be improving in the near term, but we retain a cautious bias towards global emerging markets, given the considerable risks,” analysts led by Benoit Anne, head of emerging-markets strategy in London at Societe Generale SA, said by e-mail.

An 18 percent climb for MSCI’s developing-nation index since Oct. 4 has pared this year’s losses to 15 percent, compared with a 6.1 percent drop in the MSCI World Index. The emerging-markets gauge trades at 11 times estimated earnings, compared with 12.8 times for the MSCI World, according to data compiled by Bloomberg.

Emerging-market equities may rise 13 percent in 2012, according to UBS AG, which said any gains would depend on the “normalization of the equity risk premium.” Most favored countries include China, India and Brazil, the brokerage said in a report.

‘Soft Landing’

China’s stocks rose after International Monetary Fund Deputy Managing Director Zhu Min and National Economic Research Institute Director Fan Gang said over the weekend China’s economy is heading for a “soft landing” as economic growth slows. They cited lower inflation and bad debts at banks, and what Fan said were timely measures to avoid a property bubble.

The Hang Seng China Enterprises Index in Hong Kong jumped 2.8 percent. Huaneng Power International Inc., the nation’s biggest power producer, added 2.8 percent in Hong Kong after the China Securities Journal said the government may allow power companies to increase prices as inflation eases. BYD Co., the Chinese maker of the E6 electric car, surged 26 percent in Hong Kong, the best performance in the MSCI Emerging Markets Index today. China will lift license-plate and traffic restrictions on new-energy vehicles in some major cities, the Xinhua News Agency reported.

China Gas Holdings Ltd., a supplier of piped gas on the mainland, rallied 14 percent after saying an independent investor is keen to buy a “substantial stake” in the company.

Hungary Declines

Hungary’s Bux Index fell 2.6 percent, led by OTP Bank Plc and Cig Pannonia Life Insurance Plc, after Standard & Poor’s and Fitch Ratings indicated that Hungary’s sovereign credit grade may be cut to junk as early as this month. The forint weakened against the euro.

“There is now a risk of further sell-off in HUF assets, especially if the EU backdrop deteriorates,” Societe Generale’s Anne said. “We retain our bearish view on Hungary and are positioned with short HUF recommendations.

South Africa’s benchmark gauge increased 0.1 percent, a third day of gains, as copper rallied for a second day on reduced European crisis concern. Anglo American Plc, which makes up more than 9 percent of the benchmark index, climbed 0.9 percent. BHP Billiton Ltd., the world’s biggest mining group, added 0.1 percent.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell four basis points, or 0.04 percentage point, to 392, 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 six basis points to 308, according to data provider CMA.

--Editors: Peter Branton, Alan Purkiss

To contact the reporter on this story: Saeromi Shin in Seoul at Stephen Gunnion in Johannesburg at

To contact the editor responsible for this story: Darren Boey at

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