Emerging-market stocks rally on Fed optimism and firming oil

Emerging-market stocks rally on Fed optimism and firming oil

8 January 2015, 15:11
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On Thurday emerging-market stocks rose the most in three weeks as oil grew for a second day and Federal Reserve minutes signaled that an interest-rate increase is not unavoidable.

The benchmark gauge for developing-nation stocks added 1.5 percent to 955.25 at 1:30 p.m. in London. That helped the index halt its drop since the start of the year to 0.1 percent. Emerging-market shares posted back-to-back losses for the past two years as concern mounted China’s economy is slowing and the Federal Reserve wound down its bond-purchase program, as Bloomberg reports.

“There is a bounce-back in emerging markets after an awful start to the year,” Maarten-Jan Bakkum, an emerging-market strategist at ING Groep NV in The Hague, wrote in a message.

“Yesterday’s Fed minutes confirmed that no early rate hike is coming. Brent above $50 a barrel also helps sentiment. People are betting on a reversal of the negative under-performance trend.”

Stocks rallied yesterday as minutes from the Fed’s December meeting showed policy makers agreed they are unlikely to move on raising interest rates before late April. That followed data showing the euro area moved toward deflation, bolstering the case for enhanced stimulus. Brent traded 0.8 percent higher today, after rising as much as 1.5 percent.

Emerging-market stocks are trading near the cheapest in six months relative to equities in the developed world, according to data compiled by Bloomberg. The benchmark gauge is valued at 11.1 times projected earnings of its members, compared with 15.2 for the MSCI World Index and 16.1 for the Standard & Poor’s 500 Index.

The premium they demand for owning the debt of these countries rather than U.S. According to JPMorgan Chase & Co indexes, treasuries fell for a second day.

All 10 industry groups in the emerging-markets index rose today as energy and technology companies led gains. Two out of every three shares on the measure increased.

OAO Sberbank, Russia’s biggest lender, led the benchmark equity measure in Moscow to a one-month high. Sberbank rallied 11 percent, rising for a fourth day, the longest streak since Nov. 3. Goldman Sachs Group Inc. added the lender to a regional focus list saying it is best positioned to withstand the challenges faced by Russia’s finance industry.

OAO Gazprom and OAO Lukoil gained at least 5.7 percent each. The Micex Index advanced 5.1 percent, taking its three-day increase to 11 percent. The ruble added 3.2 percent to 61.3005 a dollar, strengthening for the first time in three days.

The Russian ruble extended gains as Brent crude climbed above $51 a barrel.

Abu Dhabi Commercial Bank PJSC jumped 6.9 percent as a gauge of Middle East stocks rallied. It jumped 6.9 percent as the Bloomberg GCC 200 Index rose 1.8 percent.

The DFM General Index advanced for a second day, led by Dubai Islamic Bank PJSC.

Taiwan Semiconductor Manufacturing Co. rose 3 percent contributing the most to the increase in the MSCI Emerging Markets Index. Regulators are considering allowing Chinese tourists to open stock trading accounts in Taiwan by the third quarter, the Economic Daily News said, citing Tseng Ming-chung, head of the Financial Supervisory Commission.

Samsung Electronics Co., the world’s biggest smartphone maker, added 0.5 percent in Seoul, after beating earnings estimates. The Kospi Index added 1.1 percent.

The Shanghai Composite slid 2.4 percent as forecasts for declines by Bank of America Corp. and HSBC Holdings Plc fueled bets that the gauge’s rally to a five-year high was excessive.

Malaysia's  ringgit climbed 0.4 percent as Malaysian stocks halted a six-day slump. The currency has lost 12 percent since August.

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