Bloomberg News

Emerging Stocks Climb for a Fourth Day on Stimulus Speculation

July 31, 2012

Emerging-market stocks rose for a fourth day on speculation central banks from the U.S. and Europe will take measures to bolster economic growth.

The MSCI Emerging Markets Index added 0.4 percent to 952.49, the most since July 5. Brazil’s Bovespa stock index dropped from an 11-week high, pushed lower by phone company Tim Participacoes SA. Samsung Electronics Co. (005930), which gets more than a third of its sales in America and Europe, capped its biggest four-day rally this year.

Policy makers at the U.S. Federal Reserve began a two-day meeting today, looking for new stimulus measures as the International Monetary Fund said Europe’s debt crisis is likely to be prolonged. Reports today showed South Korea’s industrial production fell for the first time in three months and Taiwan’s gross domestic product unexpectedly shrank. Last week, European leaders had resolved to do whatever it takes to protect the euro.

“The big signal for a risk rally will come from a strong policy response,” said Mohamed Saidi, a Brussels-based fund manager at Dexia Asset Management, which oversees about $860 million of equity assets in developing nations. “Emerging markets have been doing quite well on the back of more positive euro sentiment, starting with the words of Mario Draghi on Thursday. On top of that, there is expectation of monetary stimulus from the U.S.”

ETF Gains

The IShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM:US) tracking developing-nation shares, dropped 0.5 percent to $39.12. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, rose for a second day, increasing 2.8 percent to 26.96.

Brazil’s Bovespa Index lost 2 percent, the most in a week, with Tim Participacoes declining 5.8 percent after saying second-quarter net income slid 0.9 percent.

U.S. personal spending was unchanged after a 0.1 percent decrease the prior month that was previously reported as little changed, a Commerce Department report showed today in Washington.

The S&P/Case-Shiller index of property values in 20 cities decreased 0.7 percent from May 2011, a sign that the housing market is stabilizing. It was the smallest 12-month fall since September 2010, after dropping 1.8 percent in the year ended April, the group said today in New York.

Technology Stocks

A gauge of technology companies led advances in the MSCI Emerging Markets Index. (MXEF) Tech stocks from developing markets gained 2.1 percent today, extending this year’s advance to 9.7 percent. Shares in the emerging-markets index trade at 10.5 times estimated earnings, compared with the MSCI World Index’s multiple of 12.6, according to data compiled by Bloomberg.

Russia’s Micex Index lost 1.5 percent, halting a four-day rally. South Africa’s FTSE/JSE Africa All Share Index fell 1 percent, retreating from a record high yesterday.

South Korea’s Kospi index jumped 2.1 percent, the most among Asian benchmark gauges. Taiwan’s Taiex Index added 1.6 percent and the Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong rose 1.6 percent, its third day of gains. India’s Sensex Index (SENSEX) increased 0.5 percent.

Samsung Electronics added 2.7 percent, extending its four- day advance to 13 percent. Second-quarter earnings last week boosted its profit outlook, Shin Hyun Joon, an analyst at Dongbu Securities Co., said by phone today.

Catcher Technology Co., a casing maker, tumbled 6.8 percent in Taipei. Credit Suisse Group AG cut the stock to underperform, saying the company faces increasing earnings risk from competition. Citigroup Inc. lowered the stock to neutral.

Sany Heavy Equipment International Holdings Co. Ltd. (631), China’s biggest maker of excavators, jumped 8.9 percent, the most in nine months in Hong Kong, after saying it plans to buy back its own shares over the next six months and that its financial position and outlook “remain healthy.”

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage point, to 342, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net; Sridhar Natarajan in New York at snatarajan15@bloomberg.net

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


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Companies Mentioned

  • EEM
    (iShares MSCI Emerging Markets ETF)
    • $43.89 USD
    • -0.05
    • -0.11%
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