Emerging market stocks extended their best rally since February as stress tests signaled Spain’s banks may require less support than has been agreed and a report showed U.S. manufacturing grew more than economists forecast.
The MSCI Emerging Markets Index (VXEEM) rose 0.2 percent to 1,005.08, after gaining 5.8 percent in September. Brazil’s Bovespa stock index climbed for the first time in five days as Itau Unibanco Holding SA (ITUB4) and Banco Bradesco SA (BBDC4), Brazil’s biggest banks, advanced. Russia’s Micex gained 2.2 percent, the most in two weeks. Equity indexes in South Africa, Mexico, Hungary and Turkey also increased.
Spanish stress tests showed a capital deficit of 59.3 billion euros ($76 billion), less than the 100 billion euros agreed as part of a bailout. The Institute for Supply Management’s U.S. factory index rose to 51.5 in September from 49.6 a month earlier, above economist projections for a reading of 49.7. A gauge of manufacturing in the 17-nation euro area based on a survey of purchasing managers also beat estimates.
“Some of the gains are because of the Spanish bank stress test which weren’t as bad as people had feared,” Greg Lesko, who helps manage about $700 million at Deltec Asset Management in New York, said in a phone interview from New York. “In general there is some optimism around Europe, which is leading to gains.”
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM:US) tracking developing-nation shares, climbed 1 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, rose 2.6 percent.
The Bovespa advanced 0.7 percent, snapping its longest losing streak since July. Itau Unibanco increased 1.5 percent and Banco Bradesco rose 1.8 percent.
Spain’s banks have a capital deficit of 59.3 billion euros, stress tests conducted by New York-based management consultancy Oliver Wyman showed last weekend. Spain commissioned the stress test as part of terms to obtain a European bailout of as much as 100 billion euros for its banks.
The Institute for Supply Management’s factory index in the U.S. advanced to 51.5 last month from 49.6 in August, the Tempe, Arizona-based group said today. Economists in a Bloomberg survey projected a September reading of 49.7. The dividing line between expansion and contraction is 50.
A manufacturing survey in euro area was 46.1, above an initial estimate of 46, Markit Economics said in London today.
The MSCI Emerging Markets Index (MXEF) climbed 7 percent last quarter, as central banks from Europe, the U.S., Japan and China took action to stimulate economic growth. The gauge has added 9.7 percent this year, trailing a 12 percent increase in the MSCI World Index of developed countries. The emerging-markets gauge trades at 11.3 times estimated earnings, compared with the MSCI World’s multiple of 13.3.
Russia’s Micex Index rose to the most since Sept. 21. South Africa’s benchmark FTSE/JSE Africa All Share Index added 1.4 percent. Coal of Africa Ltd., a producer of the fuel in South Africa, jumped the most in a year after Beijing Haohua Energy Resource Co. agreed to buy a $100 million stake in the company. Turkey’s ISE National 100 index gained 0.5 percent.
The Purchasing Managers’ Index for China showed 49.8 in September after a 49.2 reading in August, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. That compares with a median forecast of 50.1 in a Bloomberg News survey. The data and a contraction add to signs that growth is at risk of reaching a 22-year low as the ruling Communist Party prepares to begin installing a new generation of leaders next month.
Nanya Technology Corp. (2408) and Powerchip Technology Corp. (5346) slumped to record lows in Taipei after Micron Technology Inc., the largest U.S. maker of memory chips, reported a loss.
Nanya Technology, which has a joint venture with Micron, lost 4.1 percent. Powerchip Technology slumped 6 percent. Micron had a fourth-quarter loss of $243 million and lower revenue as lackluster demand for personal computers reduced sales of components, it said in a filing on Sept. 27.
PAL Holdings Inc. (PAL), owner of the nation’s largest carrier Philippine Airlines Inc., plunged 15 percent in Manila, the most since November 2010. PAL said it may delist its shares from trading and the Philippine Star said Philippine Airlines is interested in buying a regional carrier.
TPK Holding Co. (3673), a supplier of touch panels for Apple Inc. devices, dropped 4.3 percent in Taipei after a Barclays Plc report said TPK’s September sales may be lower than market expectations.
The extra yield investors demand to own emerging-market dollar bonds over U.S. Treasuries slid five basis points, or 0.05 percentage point, to 303, according to JPMorgan’s EMBI Global Index.
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