Sept. 19 (Bloomberg) -- Emerging-market stocks surged, led by the biggest gain in Turkish shares since 2010, after the Federal Reserve refrained from stimulus cuts. Government bond yields fell and Malaysia’s ringgit advanced the most in 15 years.
The MSCI Emerging Markets Index rose 2.3 percent to 1,023.84 at 4:04 p.m. in Hong Kong, poised for the highest close since May 28. Equity gauges in Turkey and Russia climbed more than 20 percent from their lows this year. The ringgit, Thailand’s baht and the Indian rupee strengthened more than 2 percent against the dollar. Yields on Thailand’s 10-year bonds fell the most since June, while the rate on Turkish two-year notes declined to a two-month low.
Fed policy makers said yesterday they want more evidence of lasting improvement in the economy before paring the central bank’s $85 billion monthly bond-buying program. The median estimate in a Bloomberg survey of economists was for a $5 billion reduction. The MSCI gauge has rallied 111 percent since the Fed’s first round of bond purchases in 2008.
“The Fed’s delay on tapering gives investors a little more time to party for now,” Allan Yu, the chief investment officer of Metropolitan Bank & Trust Co., which manages $8.7 billion, said in Manila. “After this euphoria, expect volatility to pick up again as markets are likely to go back to watching U.S. data to determine when the Fed will start reducing stimulus.”
Fed Chairman Ben S. Bernanke said there is no fixed schedule for tapering and it could still start this year should data confirm the central bank’s “basic outlook.” The U.S. will report jobless claims and home sales figures today.
All 10 industry groups in MSCI’s emerging-markets index rose, led by financial and health care stocks. Turkiye Garanti Bankasi AS, Turkey’s largest bank by market value, and PT Bank Negara Indonesia, jumped more than 9 percent each.
The MSCI measure has lost 2.9 percent this year, compared with an 18 percent gain in the MSCI World Index of developed- nation shares. The developing-country index is valued at 11 times projected earnings for the next 12 months, versus 14 times for the MSCI World, data compiled by Bloomberg show.
Turkey’s benchmark stock index climbed 22 percent from this year’s low on Aug. 28. Turkiye Halk Bankasi AS advanced 8.9 percent. Russia’s Micex Index rose 2 percent, while the dollar- denominated RTS Index added 4.3 percent in Moscow, a 21 percent increase from a June 24 low.
The Jakarta Composite Index jumped 5 percent, heading for the sharpest gain since May 2010, as trading volumes surged 119 percent above the 30-day average. The Philippine Stock Exchange Index and Thailand’s SET Index advanced more than 2.8 percent while the FTSE Bursa Malaysia KLCI Index added 1.2 percent. India’s S&P BSE Sensex Index increased 3.4 percent to the highest level since November 2010.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong added 1.7 percent. Zhaojin Mining Industry Co., a Chinese gold producer, jumped 12 percent as the price of the precious metal surged the most in 15 months yesterday. Markets in China, Taiwan and Korea are closed today.
PT Bumi Serpong Damai, an Indonesian property builder, soared 15 percent in Jakarta, the biggest increase in the MSCI Emerging Markets Index.
The ringgit led a surge in Asian currencies, climbing the most since the 1998 regional financial crisis, while 10-year bond yields sank to a two-month low.
The rupee jumped 2.4 percent to a one-month high and the baht strengthened 2.3 percent. One-month non-deliverable forwards on the rupiah advanced 2.8 percent.
Riskier assets in countries such as Malaysia, Thailand, Philippines and South Korea should post “reasonable returns” over the next couple of months after the Fed’s unexpected decision, according to John Woods, a Hong Kong-based Asian strategist at Citigroup Inc.’s private bank.
While “short-term tactical opportunities exist,” there is likely to be more caution toward the end of the year, Woods said in a telephone interview. Tapering is still “a question of when as opposed to if,” he said.
--Editors: Chan Tien Hin, Michael Patterson