Bloomberg News

Emerging Stocks Jump to 8-Month High on German Confidence

December 11, 2012

Emerging-market stocks rose, pushing the benchmark index to an eight-month high, as improved German investor confidence boosted markets from Poland to the Czech Republic that benefit from growth in Europe’s biggest economy.

Stalexport Autostrady SA (STX) jumped the most in three years to lead gains in Warsaw, while Central European Media Ltd. (CETV) climbed the most in three months in Prague. Seoul-based Daewoo Shipbuilding & Marine Engineering Co. Ltd. led advances in emerging-market industrial stocks as HMC Investment Securities said shipbuilders have an “attractive” valuation.

The MSCI Emerging Markets Index added 0.5 percent to 1,034.55 in New York, the highest level since April 6. German investor confidence jumped more than economists anticipated in December, according to the ZEW Center for European Economic Research in Mannheim, overshadowing data out of China showing new yuan loans trailed forecasts last month. U.S. lawmakers returned to Washington today as President Barack Obama and House of Representatives Speaker John Boehner attempt to make a deal on fiscal policy.

“The mood is more upbeat today, despite rather unexciting loan growth in China,” Martial Godet, head of strategy at BNP Paribas CIB in London, said by e-mail. “The ZEW index may explain most of the positive trend today.”

Money Supply

Benchmark gauges in Poland, Hungary and the Czech Republic advanced at least 0.5 percent. Russia’s Micex Index (INDEXCF) added 0.1 percent, while Brazil’s Bovespa index increased 0.6 percent. The Philippine Stock Exchange Index (PCOMP) rose 1.3 percent, bringing this year’s gain for the gauge to 33.4 percent.

The FTSE Bursa Malaysia KLCI Index gained for the sixth day, adding 0.6 percent and taking the index to the highest close since Nov. 7., after official data showed the nation’s industrial output growth unexpectedly quickened in October.

The Shanghai Composite (SHCOMP) slid from a one-month high, losing 0.4 percent, and extending this year’s loss to 5.7 percent. Equity trading volumes for the Shanghai Composite Index were 46 percent above the 30-day average.

China’s M2, the broadest measure of money supply, rose 13.9 percent from a year earlier, the People’s Bank of China said today after the market close, below the median estimate of 14.1 percent.

The BSE India Sensitive Index slipped 0.1 percent, after earlier climbing as much as 1 percent amid optimism the government will take more policy steps to revive economic growth. The gauge has surged 25 percent this year.

Currencies

Shares in the United Arab Emirates tumbled, with Abu Dhabi’s ADX General Index (ADSMI) sinking 2.6 percent and Dubai’s DFM General Index slumping 1.5 percent, led by telecommunications companies as the country set new royalty rates for infrastructure use.

The Hungarian forint and the Polish zloty strengthened 0.5 percent against the euro and Turkey’s lira added 0.3 percent versus the dollar. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to 6.9 from minus 15.7 in November. The mean estimate of 38 economists surveyed by Bloomberg was for minus 11.5.

South Korea’s won climbed for a third day, appreciating 0.2 percent to a 15-month high versus the dollar, as bets the Federal Reserve may add to monetary stimulus and U.S. lawmakers will make progress in budget talks increased demand for riskier assets.

Fiscal Cliff

The extra yield investors demand to own emerging-market debt over U.S. Treasuries narrowed four basis points, or 0.04 percentage points, to 274 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

U.S. lawmakers need to agree on a budget to prevent more than $600 billion of automatic tax increases and spending cuts from coming into effect next year. Fed policy makers began a two-day meeting today that will be followed by updated projections on economic growth, unemployment, inflation and interest rates tomorrow.

The U.S. fiscal cliff is “major risk” for global growth in the first half of 2013, Bank of America strategists including Alberto Ades said in a research report emailed today. Global emerging markets’ gross domestic product will grow 5.2 percent next year, up from 4.9 percent in 2012, Bank of America said. South Korea, Mexico and Turkey show “increasing potential growth,” while Asia should produce strong 2013 returns in local debt and foreign exchange, the report said.

The 21 nations in MSCI’s developing-nations gauge send about 17 percent of their exports to the U.S. on average, data compiled by the World Trade Organization show.

Consumer Staples

Gauges of consumer utility, consumer staples and materials companies in the MSCI Emerging Markets Index (MXEF) advanced at least 0.7 percent, the most among 10 industry groups. The information technology group was the sole decliner.

The emerging-markets index has risen 13 percent this year, beating the 12 percent gain by the MSCI World Index of developed countries. The developing-nations measure trades at 11.9 times estimated earnings, compared with the MSCI World’s multiple of 13.7, data compiled by Bloomberg show.

Ten-day volatility for the MSCI Emerging Markets Index fell to 6.7, the lowest since March. The gauge may rise about 9 percent more on improving data from developing economies, Goldman Sachs Group Inc. analysts Robin Brooks and Julian Richers wrote in a client note dated yesterday.

Emerging markets will continue to lag behind developed nations in 2013, Jean-Paul Smith, a strategist at Deutsche Bank AG in London, wrote in a e-mailed report dated yesterday.

Emerging Underperforms

“We expect global emerging markets to underperform developed markets in 2013 with a much higher risk of negative absolute returns than was the case in 2012,” Smith wrote. “We anticipate that the defining event for emerging markets in 2013 will be that the structural shortcomings of the Chinese economy, which are increasingly evident at a micro level, will become too obvious for foreign investors to ignore.”

Stalexport, an operator of highways, jumped 8.9 percent, the most since Dec. 2009, to lead gains on the Warsaw Stock Exchange. (WIG) Commerical television broadcaster Central European Media rallied 6.8 percent in Prague. CEZ AS (CEZ), the biggest Czech utility, snapped a four-day slump after Bank of America Corp. recommended buying the stock. Shares rose 2.1 percent in Prague.

Daewoo Shipbuilding jumped 5.9 percent in Seoul as HMC Investment Securities said in a report today that concerns over 2013 earnings prospects have eased given order flows.

Dividend Disappointment

OAO GMK Norilsk Nickel, the world’s largest producer of the metal, lost 2 percent in Moscow, its biggest drop in four weeks, on speculation the Russian mining company’s dividend will be less than earlier anticipated. The shareholders agreed that Norilsk may distribute at least $9 billion in dividends over three years, three people familiar with the matter, who asked not to be identified because the plan isn’t public, said today. That’s down from an initial projection of more than $10 billion that the three people gave last week.

Dana Gas PJSC (DANA), the United Arab Emirates fuel producer, rallied 7.5 percent in Abu Dhabi. EFG-Hermes Holding SAE raised its share price estimate by 55 percent after the company said it will pay bondholders $70 million in cash and split the remaining Shariah-compliant debt into $425 million tranches of convertible bonds and ordinary sukuk.

OGX Petroleo & Gas Participacoes SA and LLX Logistica SA (LLXL3) fell in Sao Paulo after billionaire Eike Batista denied a report saying he plans to sell stakes to the national development bank. Cia. Siderurgica Nacional SA gained 2.1 percent after commodities increased.

China Loans

STX Pan Ocean Co. (028670) jumped 15 percent in Seoul, the most since Dec. 2008. The shipping company’s parent may announce the sale of a 51 percent stake in STX OSV Holdings Ltd. (SOH), a maker of offshore vessels, MoneyToday said, citing unidentified officials familiar with the deal. The group declined to comment on the MoneyToday report when contacted by Bloomberg News today.

Poly Real Estate Group Co. (600048), China’s second-biggest listed developer, declined 2.1 percent, the sharpest loss since Nov. 28. China’s banks extended 522.9 billion yuan ($84 billion) of local-currency loans last month, the central bank reported today. That’s less than the 550 billion yuan median estimate in a Bloomberg News survey of economists and the 562.2 billion yuan of loan in November last year.

Wintek Corp. (2384), a maker of liquid crystal displays, slumped 6 percent in Taipei, the biggest decline in the MSCI Emerging Markets Index, after November sales dropped 25 percent from a year earlier.

To contact the reporters on this story: Ian Sayson in Manila at isayson@bloomberg.net; Maria Levitov in London at mlevitov@bloomberg.net

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


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