Bloomberg News

Most Emerging Stocks Gain on China Easing, U.S. Fed Remarks

May 17, 2012

Most emerging-market stocks rose, as the benchmark index rebounded from a four-month low, on speculation China will take steps to boost economic growth and the Federal Reserve will do more to stimulate the U.S. economy.

Advancing stocks outnumbered decliners by 379 to 249 as the MSCI Emerging Markets Index (MXEF) traded little changed at 924.51 as of 12:02 p.m. in London. The gauge earlier climbed as much as 1 percent, the most since April 12. Chinese shares advanced for the first time in five days. Russian stocks headed for the lowest since October amid concern that Greece’s financial crisis is worsening as the region’s central bank paused lending to some of the country’s banks. OAO Sberbank, Russia’s biggest bank, slid.

China’s economic growth is likely to accelerate for the first time in seven quarters after banks’ reserve requirements were cut, buoying global expansion threatened by a possible Greek exit from the euro. Third-quarter growth will rebound to 8.3 percent from 7.9 percent this quarter, according to the median estimate of 21 economists surveyed by Bloomberg News. Minutes from the last Federal Reserve meeting showed some policy makers said further easing may be necessary should the U.S. economy slow.

“The measures in China are helping sentiment,” said Chung Yun Sik, the Seoul-based chief investment officer for equities at ING Investment Management Korea Ltd., which oversees about $16 billion. “It’s true that stocks are oversold in a short period of time, but uncertainties especially in Europe should linger on for a while.”

Greece Concerns

The MSCI Emerging Markets Index is heading for a ninth week of declines, its longest stretch of weekly losses since 1994. More than $3 trillion of global stock market value has been erased this month as concern Greece will exit the euro curbed demand for riskier assets.

The developing nation’s index, up 1.1 percent this year, trades at 9.9 times estimated earnings, compared with 11.8 for the MSCI World Index (MXWO) of advanced nations, which has added 1.7 percent in 2012.

In the U.S., the Fed signaled further monetary easing remains an option to protect the U.S. economy from the danger that lawmakers will fail to reach agreement on the budget or Europe’s debt woes worsen.

Japan’s economy expanded by a faster-than-estimated 4.1 percent in the first quarter, boosted by reconstruction spending that’s poised to fade just as a worsening in Europe’s crisis threatens to curtail export demand.

Singapore also reported a rebound in growth last quarter as gross domestic product increased by an annualized 10 percent, while warning about the risk of a disorderly European debt default.

The Philippine Stock Exchange Index surged 3.1 percent, the largest gain among its Asian peers, as it snapped a six-day, 7.2 percent slump. Taiwan’s Taiex added 1.7 percent and the BSE India Sensitive Index climbed 0.4 percent.

Europe Shares Fall

Emerging-market stocks in Europe, the Middle East and Africa were mostly weaker after the European Central Bank said it will temporarily stop lending to some Greek banks to limit its risk as President Mario Draghi signaled the ECB won’t compromise on key principles to keep Greece in the euro area. Ukraine’s UX Index (UX) of the country’s most liquid stocks slid as much as 4.1 percent, making it the worst-performing gauge worldwide.

Russia’s 30-stock Micex Index slid 1.8 percent, poised for the lowest close since Oct. 6. Sberbank’s preferred shares fell 1.7 percent. The lender has the third-biggest weighting on the index at 14 percent.

Polish stocks dropped 0.5 percent. KGHM Polska Miedz SA (KGH), the copper producer with the biggest European mine output, climbed the most in a week as the metal rebounded and Societe Generale SA upgraded the stock.

South Africa

South Africa’s All Share (JALSH) index declined 0.9 percent as Anglo American Plc (AGL), the country’s biggest mining investor, headed for its lowest close in more than eight months. Investec Ltd., a banking group and fund manager with operations in South Africa, Australia and the U.K., declined for a fourth day, dropping 2.4 percent after the company reported a 41 percent decline in full-year profit.

The Czech market retreated 0.1 percent. Turkish and Hungarian stocks advanced.

China said it will allocate 26.5 billion yuan ($4.2 billion) in subsidies to promote the use of energy-saving household appliances and products, replacing a consumption- incentive program that ended last year. The nation will allocate a further 6 billion yuan of subsidies for purchases of vehicles with engines of less than 1.6 liters, it said.

Haier Electronics Group Co. (1169) and other Chinese appliance stocks rallied after the government said it will provide subsidies to promote energy-saving appliances. Tencent Holdings Ltd. (700), China’s biggest Internet company, rose the most in two weeks after posting record profit.

Market Volatility

South Korea’s Kospi index rose 0.3 percent after the country’s vice finance minister said it’s prepared to take “prompt” action to stabilize markets should it be needed.

“We are very experienced in dealing with such market volatilities,” Vice Finance Minister Shin Je Yoon told reporters after an emergency meeting in Seoul on the situation in Greece and Europe. “We’re ready with a comprehensive action plan should the situation worsen.”

Korea Gas, the world’s biggest liquefied natural gas importer, jumped 6.4 percent, the most since March 27. Eni SpA, Italy’s largest oil company, said the Coral-1 exploration well found as much as 10 trillion cubic feet of gas in the southern part of Area 4 off Mozambique. Eni holds 70 percent of the block, while Korea Gas (036460) has 10 percent.

The Markit iTraxx SovX CEEMEA Index of eastern European, Middle East and Africa credit-default swaps declined 2 basis points to 322, according to data compiled by Bloomberg.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell basis basis points, or 0.04 percentage point, to 391, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net

To contact the editor responsible for this story: Allen Wan at awan3@bloomberg.net Gavin Serkin at gserkin@bloomberg.net


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