Emerging-market stocks rose from a two-week low as slower-than-estimated expansion in China’s economy and a lower growth target from South Korea’s central bank fueled speculation about more economic stimulus.
The MSCI Emerging Markets Index (MXEF) added 1.3 percent to 926.13 as of 4:31 p.m. in New York, paring its weekly decline to 2.1 percent. Energy companies led the advance with Petroleo Brasileiro SA rallying in Sao Paulo and OAO Novatek gaining in Russia as oil advanced. Brazil’s Bovespa rose to a one-week high while Russia’s Micex Index (INDEXCF) gained for the first time in three days. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong increased 0.8 percent.
China’s gross domestic product expanded 7.6 percent last quarter from a year earlier, the slowest pace since 2009, putting pressure on Premier Wen Jiabao to take steps to secure a second-half economic rebound. The Bank of Korea reduced its 2012 economic-growth forecast for the second time this year, a day after it unexpectedly cut interest rates.
“What we’re seeing is a relief rally,” Win Thin, global head of emerging-market strategy at Brown Brothers Harriman & Co., said by phone from New York today. “The euro debt crisis and global growth concerns are definitely still intact, but the China data wasn’t extremely bad and it looks like there will be more economic stimulus.”
MSCI’s index of developing nations has tumbled 9.8 percent in the past three months as data worldwide pointed to a slowing global economy and European policy makers wrangled over solutions for the region’s debt crisis. The gauge trades at a multiple of 10.1 times estimated earnings, compared with 12.3 for the developed-nation gauge, data compiled by Bloomberg show.
The IShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM:US) tracking developing-nation shares, added 1.9 percent to $38.49.
The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, dropped 6.2 percent to 26.34, the most in two weeks.
Crude oil rallied for a third day on the New York Mercantile Exchange, lifting oil producers on Brazil’s Bovespa and Russia’s Micex Index.
The Bovespa index added 1.7 percent after Petroleo Brasileiro, the state-controlled oil company known as Petrobras, surged 5.2 percent, the most since May 21. Retailer B2W Cia. Global do Varejo jumped 6.7 percent to lead the advance in Sao Paulo.
The benchmark Micex gauge rose 1.6 percent in Moscow, led by OAO Novatek. The Russian natural-gas producer jumped 6 percent on speculation the company may breach OAO Gazprom’s monopoly on exports.
OAO Rostelecom, Russia’s long-distance phone operator, gained for the first time in three days, advancing 1.1 percent as first-quarter profit jumped after broadband and paid television subscribers increased.
South Africa’s FTSE/JSE Africa All Share Index (JALSH) rose 1.2 percent and Poland’s WIG20 (WIG20) Index jumped 1.7 percent.
South Korea’s Kospi index climbed 1.5 percent and Vietnam’s VN Index increased 2 percent, the most since May. India’s rupee gained 1.4 percent against the dollar, the most among 25 emerging-market currencies tracked by Bloomberg.
China’s central bank may cut interest rates once or twice more this year and reduce the reserve-requirement ratio two or three more times in 2012, the China Daily reported, citing Zhu Baoliang, chief economist at the State Information Center. Economic growth will rebound in the third quarter after hitting a bottom the previous quarter, according to the report. The government cut rates on July 5 for a second time in a month.
“In Asia, authorities seem to be busy downgrading their growth forecast,” Benoit Anne, head of emerging markets research at Societe Generale SA in London, wrote in an e-mailed note today. “That means that we expect Asian central banks to shift to a more dovish stance going forward.”
China Southern Airlines Co. (1055) gained 8.4 percent in Hong Kong, the most since October, after the Shanghai Daily said the government may set up investment companies to buy stakes in domestic carriers.
In Seoul, South Korea’s central bank said the nation’s economy will expand 3 percent this year, compared with a 3.5 percent prediction made in April and a 3.7 percent forecast in December. Consumer prices are expected to rise 2.7 percent, down from an earlier forecast of a 3.2 percent gain.
Hyundai Motor Co. (005380) jumped 3.4 percent, its biggest gain since June 18. The company’s union, which ended discussions with management on June 28, agreed to resume negotiations on July 18, raising optimism Hyundai Motor will avert work stoppages that would dent earnings.
Samsung Electronics Co., the world’s largest maker of televisions and mobile phones, climbed 4.4 percent, rallying from a five-month low.
Tata Consultancy Services Ltd. (TCS) advanced 1.1 percent, leading gains among technology shares after reporting profit in the three months ended in June climbed 38 percent to 32.8 billion rupees ($595 million). Analysts had estimated profit of 31.8 billion rupees.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell seven basis points, or 0.07 percentage point, to 358, according to JPMorgan Chase & Co.’s EMBI Global Index.
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