Bloomberg News

Emerging-Market Stocks Advance on Philippine Debt Upgrade

March 27, 2013

Emerging-market stocks had the longest advance in a month as the Philippines got its first investment-grade rating and China’s largest banks posted a decline in bad-loan ratios. Brazil’s real strengthened.

SM Investments Corp. (SM) rose 5.3 percent, leading Philippine stocks to a record. Industrial & Commercial Bank of China Ltd. (3988), the world’s most profitable lender, gained as profit beat analysts’ estimates. Brazil’s Bovespa index climbed as PDG Realty SA Empreendimentos & Participacoes rallied. The Turkish lira rebounded after Standard & Poor’s raised the country’s rating to BB+, its highest non-investment grade category.

The MSCI Emerging Markets Index added 0.3 percent to 1,032.05 in New York, gaining for a third straight day. Philippine stocks and the peso surged as Fitch Ratings raised the nation’s debt rating to BBB-. Agricultural Bank President Zhang Yun said yesterday Chinese banks’ non-performing loans are at a “manageable” level. Cyprus announced capital controls to prevent outflows when banks reopen tomorrow.

The rating upgrades “reaffirm that’s the part of the world you don’t have to worry about in terms of credit issues,” Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said by phone. His firm oversees more than $20 billion. “There’s been a focus on whether there are massive bad loan problems in China,” he said. The news “takes that worry off the table.”

Financial shares in the MSCI Emerging Markets Index gained the most among 10 groups. The broader gauge has slipped 2.2 percent this year, trailing a 6.8 percent gain in the MSCI World Index (MXWO) of developed-country stocks. The emerging-markets measure trades at 10.8 times 12-month projected profit, compared with the MSCI World’s 14.2, according to data compiled by Bloomberg.

Emerging ETF

The iShares MSCI Emerging Markets exchange-traded fund, the ETF tracking developing-nation shares, gained 0.4 percent to $42.68. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, dropped 1.4 percent to 16.63.

Cyprus’s banks will open their doors to customers tomorrow for the first time in almost two weeks, with new rules curbing access to cash. Moody’s Investors Service lowered the highest rating that can be assigned to a domestic debt issuer in Cyprus to Caa2, citing growing risk the country would exit the euro.

Brazil’s Bovespa index rose to a one-week high as homebuilder PDG Realty gained 5.4 percent. It earlier tumbled as much as 4.4 percent after it reported an unexpected net loss. The real rose 0.3 percent, erasing earlier losses as the central bank intervened to stem the currency’s decline.

Mexico, Russia

Mexico’s IPC Index added 0.9 percent, climbing for a sixth day in its longest streak of gains since Jan. 23.

Russian shares rose for the first time in four days. Poland’s WIG20 Index added 1.4 percent. PGE SA (PGE), the country’s largest electricity company, added 3.9 percent. Benchmark indexes in Hungary and the Czech Republic dropped.

Turkey’s ISE National 100 Index rose 0.3 percent to gain a fifth day. “The Turkish economy appears to be slowly rebalancing, without undermining its relatively strong fiscal performance,” S&P said after the country’s market closed.

The Philippine Stock Exchange Index jumped 2.7 percent as the currency strengthened 0.3 percent. The benchmark stock index jumped 35 percent in the past 12 months and the peso appreciated 5.2 percent, leading gains in Asia’s 10 biggest developing economies, according to data compiled by Bloomberg. SM Investments rallied to a record.

The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong added 1 percent. ICBC rose 0.7 percent, extending a three-day rally to 2.4 percent. Fosun International Ltd. (656) jumped 9.8 percent, the biggest gain in the MSCI Emerging Markets Index (MXEF), after saying profit increased last year.

Tax Shareholders

Egypt’s EGX 30 Index advanced 0.7 percent as Orascom Telecom Holding SAE that jumped 3.1 percent. National Societe Generale Bank SAE slumped 9.5 percent in Cairo. Egypt plans to tax shareholders that profited from selling shares in Societe Generale SA’s Cairo-based unit to Qatar National Bank SAQ except for the parent company, according to a letter released by the Egyptian bourse yesterday.

The extra yield investors demand to own developing-nation dollar debt over U.S. Treasuries rose six basis points, or 0.06 percentage point, to 307, according to the JPMorgan Chase & Co. 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 editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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