Bloomberg News

Emerging Stocks Rise Most in Week on Earnings, Stimulus

July 26, 2012

Emerging-market stocks rose for the first time in five days as China announced measures to bolster growth in the world’s second-largest economy and investors bet central banks will take more actions to stimulate spending.

The MSCI Emerging Markets Index (MXEF) gained 1.2 percent to 916.44 as of 5:10 p.m. in New York. Brazil’s Bovespa index advanced as pulp producer Fibria Celulose SA jumped after reporting a quarterly loss that was narrower than forecast. Mexican equities rose after Mexichem SAB (MEXCHEM*) reported earnings that beat estimates. Russian stocks gained 1.2 percent as oil, the nation’s chief export earner, rose for a third day.

Local Chinese governments are expanding efforts to stimulate their regional economies after the country’s gross domestic product fell to a three-year low in the second quarter while growth in industrial production and retail sales slowed in June. Stocks extended gains after European Central Bank President Mario Draghi said the ECB will do whatever is needed to preserve the euro.

“These are indications that China’s government is going to stimulate, and they are in a better fiscal position than anyone to step on the gas,” Kevin Carter, co-founder and chief executive officer at Baochuan Capital Management LLC, where he helps oversee about $282 million, said by phone from Walnut Creek, California. “There’s been a lot of negativity in the market lately, and while sentiment could get worse, this is at least a short-term bounce.”

Gauges of telecommunications services, materials and energy companies led gains in the MSCI Emerging Markets Index today. LG Electronics Inc. (066570), the world’s fourth-largest cellular-phone maker, led gains by consumer discretionary companies, after saying mobile shipments may improve in the third quarter.

Technology, Consumer Shares

The broader index is little changed this year, compared with a 3.8 percent gain in the MSCI World Index. (MXWO) The developing- nations measure trades at 10.1 times estimated earnings, compared with the MSCI World’s multiple of 12.4, according to data compiled by Bloomberg.

The Bovespa (IBOV) rose for the first time in five days as optimism that policy makers will contain Europe’s debt crisis boosted commodities, lifting Brazilian producers. Fibria jumped 7.5 percent while Petroleo Brasileiro SA, the second-worst performer among major oil producers this year, followed crude higher.

Russia’s Micex Index climbed as crude rose for a third day after U.S. reports on durable goods and jobless claims reduced concern that economic growth is slowing in the world’s largest economy.

South Africa’s FTSE/JSE Africa All Share Index gained 0.6 percent for its third consecutive advance. Anglo American Plc, which makes up more than 7 percent of the index, rose 1.2 percent.

Turkey, Hungary

Turkey’s ISE National 100 Index (XU100) jumped 3.5 percent, the biggest gain in six months. Turkcell Iletisim Hizmetleri AS (TCELL), the nation’s largest mobile-phone operator, surged 4.3 percent, the most in eight months, after second-quarter profit beat estimates.

Hungary’s BUX Index advanced 1.2 percent and the PX index in the Czech Republic added 1 percent, both rising for a third day.

Central bank officials in Japan and Thailand indicated yesterday that they are ready to ease monetary policy if necessary as Spain’s borrowing costs rise and Greece risks exiting from the euro. HSBC Holdings Plc forecasts that South Korea will cut interest rates further this quarter after Governor Kim Choong Soo said yesterday that Asia’s fourth- largest economy is losing steam faster than expected.

Central Banks

Policy makers from the U.S. Federal Reserve, the ECB and the Bank of England all meet next week before the fifth anniversary of the financial crisis in August. Fed Chairman Ben S. Bernanke’s Federal Open Market Committee meets July 31 and Aug. 1, a day before ECB President Draghi’s Governing Council and BOE Governor Mervyn King’s Monetary Policy Committee.

The institutions’ last meetings ended with the Fed extending its Operation Twist program, the ECB cutting its benchmark rate to a record-low 0.75 percent and the Bank of England restarting bond buying.

‘Bold Actions’

“Monetary policies haven’t produced significant results yet, so politicians need to take bold actions,” Jeffrosenberg Tan, who helps manage about $500 million at PT Sinarmas Asset Management in Jakarta, said in a phone interview. “Governments are still in an accommodative stance monetary and fiscally.”

The 21 countries in the developing-nation gauge send about 30 percent of their exports to the European Union on average, data compiled by the World Trade Organization show.

South Korea’s Kospi index rose 0.7 percent. The Bank of Korea said it expects economic growth to improve in the second half. Gross domestic product increased 2.4 percent in the three months through June from a year earlier, the least since the third quarter of 2009, data showed today. China’s Shanghai Composite Index fell 0.5 percent to the lowest level since March 2009.

LG Electronics rose in Seoul after Chief Financial Officer David Jung said yesterday mobile-phone shipments may improve in the third quarter.

Hyosung Corp. (004800), a South Korean chemical and trading company, surged 7.7 percent after KTB Investment & Securities Co. said the company’s second-quarter operating profit may be more than double the brokerage’s previous estimate.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell nine basis points, or 0.09 percentage point, to 359, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net; Leon Lazaroff in New York at llazaroff@bloomberg.net

To contact the editors responsible for this story: Darren Boey at dboey@bloomberg.net; Gavin Serkin at gserkin@bloomberg.net


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