Emerging-market stocks advanced the most in six weeks as investors speculated Chinese government spending and European Central Bank bond purchases will bolster the global economy.
The MSCI Emerging Markets Index (MXEF) advanced 1.9 percent to 968.82, its biggest increase since July 27, capping its first weekly gain since Aug. 10. The Hang Seng China Enterprises Index jumped 4 percent and China Resources Cement Holdings Ltd. (1313) surged 14 percent on plans to build more roads. Stock gauges in Russia, Hungary and India each advanced more than 1.3 percent. Chile’s IPSA index climbed the most in three weeks.
The emerging-market index surged for a second day after the ECB agreed to an unlimited bond-buying program to support growth in the European Union, which purchases about 30 percent of exports from nations in the MSCI gauge. China’s announcement on roads came a day after approvals for subway projects in 18 cities. A U.S. report showed job growth slowed more than forecast last month, boosting expectations that the Federal Reserve will start a third round of debt purchases.
“Much of the optimism comes from Draghi’s announcement, and the fact that the jobs number is poor means we are going to get easing measures from the Fed,” Aryam Vazquez, an economist for global emerging markets at Wells Fargo & Co., said by phone from New York. “The Chinese are certainly priming the fiscal pump to limit the downside risks to growth.”
EM ETF Surges
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM:US) tracking developing-nation shares, increased 2.3 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slumped 7.2 percent.
The U.S. economy added 96,000 workers last month following a revised 141,000 increase in July that was smaller than initially estimated, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for a gain of 130,000.
The MSCI gauge advanced 2.3 percent this week, extending its gain this year to 5.7 percent. The 21-country index is valued at 10.9 times estimated earnings, compared with 13.3 times for the MSCI World Index of developed-nation shares, according to data compiled by Bloomberg.
Russia’s Micex Index rose 1.3 percent and Hungary’s BUX gained 1.6 percent. India’s BSE India Sensitive Index rallied the most since June, climbing 2 percent.
The BUX index advanced for a sixth day, the longest stretch of gains since January. The country needs and will obtain a credit line from the International Monetary Fund even as the government opposes the conditions currently demanded for the aid, Prime Minister Viktor Orban said in an interview with state-run Kossuth radio today.
Orban sparked a tumble in Hungarian bonds and the currency yesterday after saying in a video message that he rejected the Washington-based lender’s aid criteria.
Cap SA , Chile’s largest iron miner and steel producer, rose 3.8 percent for the biggest increase in three months after iron-ore swaps rose the most in five months. Multiexport Foods SA, the country’s second-largest publicly traded salmon exporter, jumped 4.5 percent, the most among IPSA members.
China’s government backed nine sewage-treatment plants, five port and warehouse projects, and two waterway upgrades in addition to plans to build 2,018 kilometers (1,254 miles) of roads, according to statements on the website of the National Development and Reform Commission yesterday. No investment amounts were given.
Chinese construction-related stocks advanced. Anhui Conch Cement Co. (914), the country’s biggest supplier of the building material, gained 8.5 percent in Hong Kong. China Resources Cement jumped the most on record, while Angang Steel rallied 8.8 percent. Zoomlion Heavy Industry Science and Technology Co., China’s second-biggest machinery maker, climbed 8.1 percent.
South Korea’s debt rating was upgraded by Fitch Ratings to AA-, the same as Saudi Arabia and one level higher than Japan and China, 10 days after a similar move by Moody’s Investors Service. The rating reflects the country’s economic, financial and political stability and ability to cope with a volatile global environment, Fitch said in a statement yesterday.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries dropped 5 basis points, or 0.05 percentage point, to 301 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index. (VXEEM)
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