Bloomberg News

Emerging Stocks Jump as BRICs Set for Bull Market on U.S.

January 02, 2013

Developing-nation stocks rose to a 10-month high, pushing the MSCI BRIC Index of the largest emerging markets up 22 percent from last year’s low, after U.S. lawmakers passed a bill that averted spending cuts and tax gains that had threatened the world’s largest economy.

Samsung Electronics Co. (005930), the world’s biggest maker of televisions and mobile phones, rallied 3.6 percent to a record, pushing an index of emerging-market technology stocks to the highest in more than 12 years. China Pacific Insurance (Group) Co. (267) jumped to a 17-month high after Credit Suisse Group AG included the stock among its 2013 top picks. Brazil’s Bovespa Index (IBOV) surged to the highest since April, boosted by Vale SA.

The MSCI Emerging Markets Index jumped 2.1 percent to 1,078.16 in New York, the highest since March 2. The MSCI BRIC Index (MXBRIC) rose 2.6 percent to close in a bull market. The House of Representatives voted in favor of budget law as Republicans abandoned efforts to add spending cuts, boosting confidence in the U.S. economy. The 21 nations in the developing-nations gauge send about 17 percent of their exports to the U.S. on average, data compiled by the World Trade Organization show.

“The fiscal cliff was one of the big drags on the market at the end of the last year, so I suspect that for the next few days and weeks we’re going to see markets run up further,” Neil Shearing, the chief emerging markets economist at Capital Economics Ltd., said by phone from London.

ETF Surges

The iShares MSCI Emerging Markets Index (EEM:US) exchange-traded fund, an ETF tracking developing-nation shares, jumped 2 percent to $45.23, the strongest close since August 2011. The ETF will see more inflows after the amount of shares outstanding reached a record last week according to Marketfield Asset Management LLC. Outstanding shares rose to an all-time high of 1.11 billion by Dec. 28, data compiled by Bloomberg show. The Vanguard MSCI Emerging Markets ETF (VWO:US) rallied 2.1 percent to $45.47, the strongest close since August 2011.

The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, lost 9 percent to 19.74, the lowest on record.

The Mexico IPC Index climbed 1.4 percent to a record, while Brazil’s Bovespa rallied 2.6 percent to the highest level since April 19 as commodity prices boosted the outlook for the country’s biggest companies. Iron-ore producer Vale jumped 4.2 percent, while oil producer OGX Petroleo e Gas Participacoes SA climbed 8.7 percent.

Braskem SA (BRKM5), Latin America’s largest petrochemical maker, surged 6.4 percent in Sao Paulo after selling Brazilian assets for a total of 652 million reais ($319.6 million).

‘Avoid a Recession’

The Hang Seng China Enterprises Index (HSCEI) of mainland companies traded in Hong Kong advanced 4 percent, the most among Asian emerging-market gauges. The BSE India Sensitive Index climbed 0.7 percent to a two-year high, led by Bajaj Auto Ltd. (BJAUT), which gained 3.1 percent, as its December sales surged. Russia’s equity market was closed for holidays.

“Investors are positioning in emerging markets for the coming year, encouraged by the removal of the U.S. fiscal cliff issue,” said Paul Joseph Garcia, who helps manage about $18.3 billion as senior vice president at BPI Asset Management Inc. in Manila. “The global scenario isn’t going to be as bad as previously imagined since this measure will help the U.S. avoid a recession.”

Commodity producers rallied in Johannesburg, leading the FTSE/JSE Africa All-Share Index (JALSH) 2.1 percent higher to the highest level on record. Oil companies helped lift Poland’s WIG20 Index (WIG20) up 1.7 percent, and Dubai’s DFM General Index (DFMGI) surged 2.7 percent.

Turkey, Malaysia

The Czech Republic’s PX Index rose 2.6 percent to the highest level since August 2011, led by television channel operator Central European Media Enterprises Ltd., which increased 9 percent.

Turkey’s Istanbul Stock Exchange National 100 Index (XU100) rose 1.8 percent to a record. Zorlu Enerji Elektrik Uretim AS climbed 14 percent, the biggest rally since Sept. 2009. The Istanbul- based power utility said Dec. 31 it will acquire power producer Zorlu Dogal Elektrik Uretimi from parent Zorlu Holding and group firms.

The FTSE Bursa Malaysia KLCI Index declined 0.8 percent with trading volumes about 24 percent lower than the 30-day average. The measure snapped five days of gains that pushed valuations to a two-year high. Pakistan’s KSE 100 Index (KSE100) sank 1.8 percent, the most in 14 months. A planned rally by a religious scholar calling for electoral reforms was endorsed by a coalition partner of the ruling party yesterday.

Emerging Valuations

Brazil’s real gained 0.3 percent against the dollar, the most in a week. The Russian ruble strengthened to 30.1730 per dollar in unofficial trading, up from 30.5580 yesterday. The currency closed at 30.4075 per dollar on Russia’s Micex Index Dec. 28. The Indonesian rupiah strengthened 1.5 percent against the dollar to lead gains in emerging market currencies.

The MSCI Emerging Markets Index (MXEF) rallied 15 percent last year, beating a 13 percent gain in the MSCI World Index (MXWO), a measure of developed-nation stocks.

A gauge of technology companies equities in the developing- nations measure jumped 2.6 percent today to the highest level since April 2000. Largan Precision Co. Ltd. (3008) surged 6.9 percent, the most in a month to lead gains on the MSCI Emerging Markets Information Technology Index. The Taiwanese company’s revenue will be boosted by Apple Inc. and Chinese orders, Economic Daily reported, citing analysts.

The developing-nations index trades at 12.4 times estimated earnings, compared with the MSCI World’s multiple of 14.1 times, data compiled by Bloomberg show.

‘Risk-on’

The MSCI BRIC Index of Brazilian, Russian, Indian and Chinese shares has risen 22 percent from its June 4 low. A bull market is defined by a rally of 20 percent or more from a low. The Sensex has rallied 26 percent in that period, the most among the biggest emerging markets.

“The new year starts with a strong risk-on green light,” Benoit Anne, the head of emerging-market strategy at Societe Generale SA in London, said in an e-mailed note today. “There is significant scope for risky assets in emerging markets to perform strongly in the near term.”

Samsung Electronics added 3.6 percent, the biggest contributor to the MSCI Emerging Markets Index’s gain today.

China Pacific Insurance (2601) jumped 7.2 percent in Hong Kong, its fifth day of gains. The stock is among Credit Suisse’s top picks in China this year, analysts Vincent Chan and Peggy Chan wrote in a client note.

China International Marine Containers Group Co. Ltd. (2039), the world’s biggest container maker, jumped 13 percent to a record to lead advances in emerging market stocks.

Parkson Tumbles

Parkson Holdings Bhd. (PKS) was the worst performer on the gauge, sinking 7.5 percent in its worst slump in four years. The stock jumped 9.2 percent on Dec. 31, taking its 14-day relative strength index level to 79.6, the highest since Nov. 5.

Innolux Corp. (3481) jumped 6.7 percent and AU Optronics Corp. (2409) soared 5.4 percent in Taipei. The two flat-panel companies will start mass production of AMOLED displays this quarter, according to the Economic Daily News today.

Anglo American Plc, ArcelorMittal South Africa Ltd. and BHP Billiton Ltd. climbed at least 5 percent in Johannesburg. PKN Orlen SA, Poland biggest oil refiner, climbed 5.1 percent.

The S&P GSCI Index of 24 commodities added 0.9 percent, with oil rising to a three-month high and copper jumping 3.5 percent in London.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries narrowed 12 basis points, or 0.12 percentage point, to 253 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Ian Sayson in Manila at isayson@bloomberg.net; Victoria Stilwell in New York at vstilwell1@bloomberg.net

To contact the editors responsible for this story: Emma O’Brien at eobrien6@bloomberg.net; Darren Boey at dboey@bloomberg.net


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Companies Mentioned

  • EEM
    (iShares MSCI Emerging Markets ETF)
    • $45.06 USD
    • -0.07
    • -0.16%
  • VWO
    (Vanguard FTSE Emerging Markets ETF)
    • $45.4 USD
    • -0.03
    • -0.07%
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