Emerging-market stocks advanced as U.S. building permits jumped in July to a four-year peak, offsetting concern of declining foreign direct investment in China, the world’s second-biggest economy.
The MSCI Emerging Markets Index (MXEF) climbed 0.2 percent to 975.82. Brazil’s Bovespa stock index rose to a three-month high as a surprise increase in retail sales buoyed gains for homebuilder PDG Realty SA Empreendimentos & Participacoes. (PDGR3) China Mobile, the biggest phone company by subscribers, fell the most in 12 months as profit growth slowed to the weakest pace in at least 13 years.
Building permits, a proxy for future construction, rose to an 812,000 pace last month, the most since August 2008, the Commerce Department said. Retail sales in Brazil jumped more than economists expected in June. Investment in China declined 8.7 percent in July to the lowest level in two years, signaling reduced confidence that economic growth will accelerate. Premier Wen Jiabao said downward pressure on economy remained relatively large.
“Every significant data point gives you a state of play on the world’s largest economy and that obviously plays through to emerging market assets,” David Semple, who helps oversee about $33 billion as director of international equity at Van Eck Global, said by phone from New York. “People had set themselves up for even worse news from China. There are some glimmers of hope.”
EM ETF Gains
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM:US) tracking developing-nation shares, climbed 0.9 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, was unchanged at 21.62.
The Bovespa gained 2.2 percent, the highest since May 10, with PDG Realty surging 10 percent. Braskem SA (BRKM5), Latin America’s largest petrochemicals maker advanced 7.5 percent.
Retail sales volume in Brazil climbed 1.5 percent, compared with a drop of 0.8 percent in May and the biggest rise since a 3.2 percent jump in January, the national statistics agency said today in Rio de Janeiro. The median forecast of 38 analysts surveyed by Bloomberg was for a 0.3 percent decline.
Building permits in the U.S. rose, indicating the industry will keep improving in the second half of the year, Commerce Department figures showed today in Washington. Building applications in the West soared 54 percent over the past 12 months, the biggest year-to-year jump since December 1986. New- home construction fell 1.1 percent to a 746,000 annual rate from June’s 754,000 pace. The median estimate of 79 economists surveyed by Bloomberg News called for 756,000.
The Hang Seng China Enterprises Index (HSCEI) and the BSE India Sensitive Index slid 0.4 percent. The MSCI Emerging Markets Index had rallied 10 percent from this year’s low on June 4. Jonathan Garner, the chief Asia and emerging-market strategist at Morgan Stanley, reduced his year-end estimate for the index by about 7 percent to 1,130 on lowered expectations for economic growth. The new target still implies a gain of about 16 percent from the gauge’s current level.
China Mobile lost 5 percent in Hong Kong, leading a gauge of emerging-market phone companies to the steepest drop in three weeks. Second-quarter net income of 34.4 billion yuan ($5.4 billion) missed the 35.6 billion yuan median analyst estimate in a Bloomberg News survey as costs to lure customers increased.
China Yurun Food Group Ltd. (1068) slid 10 percent, the biggest drop in the MSCI emerging market index (VXEEM), after first-half profit sank 93 percent.
Tsingtao Brewery Co. (168), China’s second-biggest brewery by volume, fell 4.4 percent in Hong Kong. Net income was 1 billion yuan in the six months ended June 30, trailing projections of 1.13 billion yuan.
Tencent (700), China’s biggest Internet company, jumped 6.4 percent, the largest increase since Dec. 1. Second-quarter net income climbed 32 percent to 3.1 billion yuan, compared with an estimate of 3.08 billion in a Bloomberg survey. Lenovo Group Ltd. (992), the world’s second-biggest maker of personal computers, rose 6.3 percent to the highest level since June 22 after profit beat estimates.
The extra yield investors demand to own emerging-market bonds over U.S. Treasuries fell 3 basis points, or 0.03 percentage points, to 310, according to JPMorgan Chase & Co.’s EMBI Global Index.
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