Bloomberg News

Emerging Stocks Rise as Chavez Death Sinks Venezuela Debt

March 06, 2013

Emerging-market stocks climbed the most in two months as jobs and service industry data signaled the U.S. economic recovery is gaining traction. Venezuelan bonds declined after the death of President Hugo Chavez.[bn:WBTKR=3988:HK]

[]Brazil’s Bovespa had the biggest jump since July as Petroleo Brasileiro SA soared the most in four years after boosting diesel prices. Samsung Electronics Co., which got 20 percent of 2011 sales in the U.S., reached a two-month high in Seoul. Yields on Venezuela’s 2027 dollar bonds rose to the highest level since January. Kenya’s shilling had its biggest drop against the dollar in more than a year amid delays in presidential election results.

The MSCI Emerging Markets Index rose 0.9 percent to 1,059.84 in New York, the most since Jan. 2. U.S. companies added more workers than projected last month, while the country’s non-manufacturing sector expanded. The U.S economy expanded at a modest to moderate pace amid rising consumer demand for homes and autos, the Federal Reserve said in its Beige Book business survey today.

“We continue to gain jobs, and that ultimately will move us forward,” Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a phone interview. His firm oversees more than $20 billion. “We’re on pace for gradual improvement. And when you have lagging prices in some of the emerging markets, that suggests we should see better price action in those markets.”

U.S. Economy

Emerging equities joined gains in the U.S. as a private report showed companies added 198,000 workers last month, beating the median economist forecast. Service industries in the country expanded in February at the fastest pace in a year, according to a report yesterday. The 21 countries in the developing-nations gauge send about 17 percent of their exports to the U.S., data compiled by the World Trade Organization show.

China’s central bank and lenders bought a record net 683.7 billion yuan ($110 billion) of foreign currency in January, a sign the nation’s emergence from its slowdown is spurring funds to buy Chinese assets. Bank of China Ltd. added 2.5 percent in Hong Kong as the yuan rallied.

The iShares MSCI Emerging Markets Index exchange-traded fund gained 0.5 percent to $43.63. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a gauge of options prices on the fund and expectations of price swings, dropped 1.5 percent to 17.37.

All 10 groups in the MSCI Emerging Markets Index rose as energy, materials and financial shares had the biggest gains. The broader gauge has added 0.4 percent this year, compared with a 6.3 percent advance in the MSCI World Index of developed nations. Shares in the developing-nation gauge are valued at 10.6 times projected 12-month earnings, versus the MSCI World’s 14 times, data compiled by Bloomberg show.

Venezuela’s Bonds

Venezuela’s dollar-denominated bonds fell for a second day. The yield on 9.25 percent bonds due in September 2027 climbed 28 basis points, or 0.28 percentage point, to 9.26 percent as of 5.24 p.m in New York, after rising nine basis points yesterday, according to data compiled by Bloomberg. Five-year credit- default swaps rose 20 basis points to 661 basis points today.

“The markets have already priced in a lot that Chavez might die,” Sergey Dergachev, a fund manager who oversees about $9 billion at Union Investment Privatfonds in Frankfurt, said by e-mail. “Now the risk is who will become the next president. Investors are clearly nervous about where Venezuela will be heading, and room for disappointment is there.”

Bovespa Gains

Brazil’s Bovespa rose 3.6 percent, the most since July. Petrobras soared 9 percent, the most since December 2008, after the state-controlled oil producer said the government unexpectedly approved a 5 percent increase in diesel prices. Trading volume was 2.6 times the three-month full day average, according to data compiled by Bloomberg.

Homebuilder Urbi Desarrollos Urbanos SAB jumped 19 percent, the most since 2008, pushing the IPC Index up 0.3 percent. Mexico will cover 30 percent of homebuilder losses, the country’s Finance Ministry said today.

Kenya’s shilling weakened 1.5 percent to 86.75 against the dollar, its biggest drop since January 2012 as results from presidential elections March 4 were delayed.

Poland’s central bank cut its main interest rate by more than economists estimated to a record low. The Zloty sank 0.9 percent versus the dollar, the second-biggest decline among 25 emerging market currencies tracked by Bloomberg. The country’s benchmark stock index rose 0.2 percent.

Russia’s Micex Index rose for a second day, adding 0.5 percent. Hungary’s BUX Index rose 0.5 percent as OTP Bank, the nation’s largest lender, added 0.4 percent.

Czech Republic

The Czech Republic’s PX Index added 1.2 percent. CEZ AS rose 0.7 percent, climbing for a fourth day, its longest stretch of gains since Dec. 21. Banco Espirito Santo SA recommended buying the shares of the biggest Czech utility.

Turkey’s benchmark index advanced 1.4 percent, extending its winning streak to eight days, the longest since Jan. 24. Turk Hava Yollari AO, Turkey’s flagship carrier, rallied 2.1 percent to a record high after data showed air traffic in the country climbed an annual 13 percent last month.

South Africa’s FTSE/JSE Africa All Share Index fell 0.3 percent. MTN Group Ltd., Africa’s biggest mobile phone operator, slid 1.3 percent after full-year earnings missed analysts’ estimates.

The Hang Seng China Enterprises Index rose 1.7 percent, while the Shanghai Composite Index advanced 0.9 percent. The Philippine Stock Exchange Index added 1.8 percent. Vietnam’s VN Index jumped 1.9 percent.

Purchase Data

Bank of China, the country’s third-biggest lender, climbed 2.5 percent. The benchmark money rate touched a one-week low after the People’s Bank of China released the foreign-currency purchase data.

China Cosco Holdings Co. rose 4.9 percent after Transport Minister Yang Chuantang said policies may be introduced to support the shipping industry. China Shipping Container Lines Co. added 4.8 percent, the biggest rally since Jan. 2.

ZTE Corp., a phone-equipment maker, jumped 8.9 percent in Hong Kong after a report on approval for fourth-generation service spurred speculation carriers will boost spending. The government may issue licenses for fourth-generation wireless service this year, China Securities Journal reported today, citing Minister of Industry and Information Technology Miao Wei.

The extra yield investors demand to hold emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage point, to 281 basis points, according to the JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Maria Levitov in London at mlevitov@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

To contact the editors responsible for this story: Gavin Serkin at gserkin@bloomberg.net; Emma O’Brien at eobrien6@bloomberg.net


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