Emerging-market stocks rose, pushing the benchmark index to a fourth weekly advance, as signs economies in China and the U.S. are rebounding bolstered the outlook for energy and commodity producers.
PT Adaro Energy Tbk (ADRO) led weekly gains in the MSCI Emerging Markets Index as coal prices increased and Dongfang Electric Corp. (1072) jumped 13 percent after figures showed China’s electricity production climbed the most since February last month. Material and energy companies were the best weekly performers among 10 industry groups, with ArcelorMittal South Africa Ltd. (ACL) and Vale SA (VALE3) leading the gains.
The MSCI Emerging Markets Index was little changed at 1,042.82 in New York, as the gauge advanced 1.8 percent for the week and posted the longest stretch of gains since August. Manufacturing in China grew for the second month, according to a preliminary reading for December of a purchasing managers’ index compiled by HSBC Holdings Plc and Markit Economics. U.S. industrial production rose in November by the most in two years following superstorm Sandy.
“We’re seeing a building body of indicators suggesting that growth is starting to rebound,” Nick Chamie, global head of emerging-markets and currency strategy at Royal Bank of Canada, said in a phone interview from Toronto. “We’re feeding off of an improving data profile.”
The emerging markets gauge surged 3.5 percent in the previous seven sessions, keeping its 14-day relative strength index at 78 today, above the 70 level suggesting in technical analysis the asset may be overbought and set for a reversal.
The December preliminary reading for HSBC’s purchasing managers index for China at 50.9 compares with the 50.8 median estimate in a Bloomberg News survey of economists and a final reading of 50.5 for November, the first time in 13 months it was above the expansion-contraction dividing line of 50.
Chinese stocks rallied as the manufacturing report, combined with factory output and retail sales data earlier this week, bolstered confidence in the economic recovery. The Shanghai Composite advanced 4.3 percent this week, the biggest gain in 13 months and extending last week’s 4.1 percent rally. The Hang Seng China Enterprises Index (HSCEI) climbed 1.5 percent to a nine-month high, capping a fourth week of gains. Taiwan’s Taiex index retreated 0.8 percent today, the most since Nov. 21, trimming a weekly advance of 0.7 percent.
“It looks like institutional investors are re-entering the market, and they have to increase their stock positions now in order not to miss the boat,” said Dai Ming, a fund manager at Hengsheng Hongding Asset Management Co. in Shanghai, which manages $190 million. “The economy has stabilized.”
The Philippine Stock Exchange Composite Index (PCOMP) lost 1.4 percent, the biggest decline since July 9, after the central bank said it will implement a new rule on capital inflows. Russia’s Micex advanced 0.2 percent, boosted by OAO Mechel and OAO Rosneft, as crude oil rose 1 percent in New York. The S&P GSCI Spot Index rose 0.9 percent today, the most in two weeks.
The BSE India Sensitive Index (SENSEX) advanced for the first time in six days and the rupee dropped for a third day after inflation unexpectedly eased in November.
Brazil’s Bovespa index rose 0.5 percent, extending the weekly advance to 1.9 percent. Vale, the world’s biggest iron- ore exporter, climbed 3.2 percent to extend gains this week to 7.7 percent.
Emerging-market equities could return as much as 20 percent to investors next year as consumers drive growth in developing nations, leaving them less reliant on the U.S. and Europe, Allan Conway, head of emerging-market equities at Schroder Investment Management, said by phone from London in a Dec. 10 interview.
“The relative resilience of emerging markets over the last decade has just been increasing, and this trend will continue,” said Conway, who manages about $25 billion.
ArcelorMittal, Africa’s largest steelmaker, rallied 13 percent for the week. Australia, the world’s biggest iron-ore exporter, said on Dec. 12 that it raised its price estimate for next year on expectation that infrastructure projects and stimulus spending by China, the world’s biggest buyer, will boost demand.
The iShares MSCI Emerging Markets Index (EEM:US) exchange-traded fund, the ETF tracking developing-nation shares, added 0.4 percent to $43.38. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, dropped 1 percent to 21.
The extra yield investors demand to own emerging-market debt over U.S Treasuries rose 1 basis point, or 0.01 percentage point, to 272, according to JPMorgan Chase & Co.’s EMBI Global Index.
Investors poured $5.3 billion into developing-nations equity funds in the past week, bringing four-week inflows to 1.7 percent of their assets under management, Michael Hartnett, the chief investment strategist at Bank of America, wrote in an e- mailed report dated yesterday. That triggers a sell signal from Hartnett’s fund flows “trading rule,” which says four-week inflows totaling at least 1.5 percent of assets under management precede market declines.
MSCI’s developing-nations index has risen 14 percent this year, beating a 12 percent gain by the MSCI World Index of developed countries. The emerging-market gauge trades at 12 times estimated profit, compared with the MSCI World’s 13.6, according to data compiled by Bloomberg.
The gauge of technology stocks in the MSCI Emerging Markets Index slid 1.1 percent today, leading declines. Largan Precision Co. (3008) dropped for a fourth day on speculation shipments may retreat 30 percent in the first quarter on weaker demand for Apple’s iPhone 5, Mega Securities Co. analyst Huang Chien-hao said by phone in Taipei. Largan acting spokeswoman Josephine Huang said the company was unable to comment on first-quarter shipments.
Orders for the iPhone 5 for the first quarter were recently lowered by between 10 percent and 30 percent at many component makers of in-cell panels, crystal and polarizers, Tammy Lai, an analyst at Macquarie Group Ltd., said in a report dated today.
“There’s a lot of speculation that iPhone shipments in the first quarter will be weak so related suppliers slumped,” Parker Wu, who helps oversee the equivalent of $98 million at Agriculture Bank of Taiwan, said by phone in Taipei today.
The yuan led losses among major emerging-market currencies against the dollar today while Poland’s zloty appreciated 0.2 percent versus the euro.
KGHM Polska Miedz SA (KGH), a copper producer with the European Union’s largest output, rallied for a fifth day.
Hon Hai sank 4.7 percent, its first retreat in three days. Macquarie cut the company to neutral from outperform, citing weaker demand for the iPhone 5 and iPad. Hon Hai spokesman Simon Hsing wasn’t immediately available for comment on his mobile phone.
LG Display Co. (034220) fell 3.9 percent, extending its losses this week to 10 percent. The drop reflects investor concerns over the near-term earnings outlook due to Apple’s order cut for in-cell panels, according to an e-mailed report from Barclays today.
Gome Electrical Appliances Holding Ltd. (493), China’s second- largest electronics retailer, jumped 7.2 percent in Hong Kong, the third-biggest gain in the MSCI Emerging Markets Index, after Citigroup Inc. advised investors to buy the shares.
PT Unilever Indonesia (UNVR), a unit of the world’s second-largest consumer goods company, surged 9.1 percent in Jakarta, snapping a two-day, 22 percent slump. The stock was the worst performer for the week on the emerging markets gauge, declining 15 percent.
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