Emerging-Market Stocks Rise on IMF as Yuan Jumps to 20-Year High

Dec 23, 2013 4:57 pm ET

Dec. 23 (Bloomberg) -- Emerging-market stocks advanced, following a three-week decline, amid optimism about global growth after the International Monetary Fund indicated that it would raise its outlook for the American economy.

The MSCI Emerging Markets Index added 0.5 percent to 992.69. Hyundai Merchant Marine Co., Korea’s second-largest shipping company, surged 15 percent in Seoul, while the Shanghai Composite Index ended a nine-day slide as banks climbed. The Borsa Istanbul National 100 Index led losses among the 94 world gauges tracked by Bloomberg. The yuan advanced to its strongest level in 20 years, while yields on Ukraine’s dollar bonds due in June tumbled to a six-month low.

Stocks joined a global rally after IMF Managing Director Christine Lagarde said yesterday that the organization is boosting its outlook for the U.S. economy as a budget deal in Washington and the Federal Reserve’s plan to taper its bond buying ease doubts about the future. Data today showed that both American consumer sentiment and spending jumped.

“To the extent that people are comfortable with the pace and probability of the Fed normalizing liquidity, any incremental growth news becomes more positive,” Derrick Irwin, a portfolio manager of the Wells Fargo Advantage Emerging Markets Equity Fund in Boston, said by phone. His firm manages $223.8 billion. “If the U.S. really is emerging as an engine of growth globally, it’s going to be good for exporters, it’s going to be good for certain emerging markets.”

Biggest Gains

All 10 groups in the developing-nation gauge rose today, led by health-care stocks. The iShares MSCI Emerging Markets Index exchange-traded fund added 0.7 percent to $40.78. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, declined 5.1 percent to 20.44.

Brazil’s Ibovespa rose as steelmaker Cia. Siderurgica Nacional SA led commodity exporters higher. The real gained the most among major currencies on bets the central bank will help prevent it from falling further after last week’s decline.

The Micex Index climbed to a one-month high in Moscow, extending last week’s gain. Billionaire Vladimir Evtushenkov’s AFK Sistema rallied to the highest since January 2008. Yields on Ukraine’s dollar bonds due in June tumbled as the government prepared to receive the first $3 billion of emergency funding from Russia.

Turkish Shares

The Borsa Istanbul National 100 Index slumped to the lowest since Sept. 6. Companies close to Fethullah Gulen’s religious movement plunged on speculation that Turkish Prime Minister Recep Tayyip Erdogan is regaining the upper hand in a power struggle with the Islamic cleric. Islamic lender Asya Katilim Bankasi AS and energy explorer Ipek Dogal Enerji Kaynaklari & Uretim AS each dropped 11 percent.

China’s benchmark stock index rose, led by banks and drugmakers, after a nine-day losing streak for the benchmark index drove valuations down to a four-month low and technical indicators signaled a rebound. China Construction Bank Corp. and China Citic Bank Corp. rebounded at least 5 percent after plunging in late trade on Dec. 20. The PBOC boosted the daily fixing today by 0.06 percent, the most since Dec. 9, to 6.1161 per dollar.

Most Indian stocks advanced, led by metal and capital goods producers, as the benchmark index rose to its highest level in two weeks. Aluminum maker Hindalco Industries Ltd. rallied the most on the S&P BSE Sensex, sending an industry gauge to its highest level since February.

Hyundai Merchant jumped the most since June in Seoul after Hyundai Group said it plans to sell assets to raise 3.3 trillion won ($3.1 billion). South Korea’s three biggest shipping companies face a cash crunch as 3 trillion won of bonds are due for repayment in the next two years amid mounting losses from a global slump in rates to carry sea cargo.

The premium investors demand to own emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage point, to 311 basis points, according to JPMorgan Chase & Co.

--Editors: Rita Nazareth, Zahra Hankir