Bloomberg News

Emerging-Market Stocks Rise as Brazil Gain Outweighs Russia Drop

July 21, 2014

Emerging-market stocks rose for a second-day as Brazilian state-run companies gained on speculation a new government will boost economic growth, outweighing declines in Russian shares.

Indonesia’s benchmark rose for a second day before the release of presidential election results tomorrow. The Micex Index fell the most since March in Moscow as President Vladimir Putin faced mounting international pressure after the downing of the Malaysian passenger jet in Ukraine. The Shanghai Composite Index declined amid concern new share sales may divert funds from existing shares.

The iShares MSCI Emerging Markets ETF advanced 0.3 percent to $44.31. The Brazilian state-controlled oil producer Petroleo Brasileiro SA led the Ibovespa to a four-month high in Sao Paulo as a voter poll dimmed the prospects for President Dilma Rousseff’s re-election bid.

“Investors got very excited by the prospect of an opposition win, bringing in more business-friendly measures,” Otavio Vieira, a partner at hedge fund Fides Asset Management, said by phone from Rio de Janeiro. “The market is pricing in a change in government. The possibility is there, as the polls show.”

The MSCI Emerging Markets Index increased less than 0.1 percent to 1,063.79. Six out of ten industry groups in the benchmark rose, led by utility and consumer staples stocks.

Micex Drops

OAO Sberbank was the worst performer on the developing-market gauge by index points. The Russian lender’s shares sank 4.6 percent in Moscow. European Union foreign ministers meeting in Brussels tomorrow will consider tougher sanctions on Russian individuals and companies, while Putin said the Malaysian plane crash shouldn’t be used for political aims.

“The risk of more far-reaching sanctions against Russia has increased since the crash,” Maarten-Jan Bakkum, an emerging-market strategist at ING Investment Co. in the Hague, said by e-mail.

The Micex retreated for a sixth day in Moscow, dropping 2.7 percent. The ruble fell 0.2 percent against the dollar, depreciating for the sixth time in seven sessions.

U.S. Secretary of State John Kerry said yesterday circumstantial evidence suggests Russia provided the missile that Ukrainian rebels used to shoot down the plane. Putin blamed the crash on the Ukrainian government, saying it wouldn’t have happened had it not fomented the conflict in the east.

South Africa, Egypt

The WIG30 Index in Warsaw fell 0.1 percent, declining for a second day. The FTSE/JSE Africa All Shares Index in Johannesburg decreased 0.5 percent, taking its three-day loss to 1.3 percent.

Egypt’s benchmark EGX 30 Index dropped 1.2 percent in its steepest slide since June 24. North Africa’s biggest stock exchange said today it will double the daily share price movement limit to 20 percent, starting Aug. 7, because of “market stability.”

The premium investors demand to own emerging-market debt over U.S. Treasuries was unchanged at 268 basis points, according to JPMorgan Chase & Co. indexes.

The Shanghai Composite Index (SHCOMP) slipped 0.2 percent on concern corporate earnings will disappoint and new share sales may divert funds from existing equities. Eleven companies will start to sell new shares this week. That may freeze subscription funds of about as much as 766.5 billion yuan ($123.4 billion), according to the Securities Daily.

‘System Stress’

“News from China continues to be worrying,” ING’s Bakkum said. “There has been more signs of system stress.”

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong dropped 0.8 percent.

The emerging-market gauge has risen 6.1 percent this year and trades at 11.1 times 12-month projected earnings, data compiled by Bloomberg show. The MSCI World Index gained 4.8 percent and is valued at a multiple of 15.

The Jakarta Composite Index climbed 0.8 percent and the rupiah strengthened 0.4 percent on speculation results will confirm Joko Widodo as Indonesia’s next president. Widodo secured 52.9 percent of the 129 million votes tallied by KawalPemilu.org yesterday, a volunteer-run website that tracks actual results uploaded to the election commission’s website.

The S&P BSE Sensex Index rose 0.3 percent in its fifth day of gains, the longest winning streak since April 2. Taiwan’s Taiex Index added 0.4 percent, ending a three-day loss.

To contact the reporters on this story: Natasha Doff in London at ndoff@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net; Daliah Merzaban at dmerzaban@bloomberg.net Ash Kumar, Richard Richtmyer


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