Emerging-Market Stocks Advance for First Time in 2014 on Economy

Jan 08, 2014 5:53 pm ET

Jan. 8 (Bloomberg) -- Emerging-market stocks rose for the first time this year after the International Monetary Fund said it will raise its forecast for world growth. South Korea’s won rallied on speculation exporters repatriated overseas income.

Equities briefly erased gains after minutes from the Federal Reserve’s last meeting indicated policy makers see risks to financial stability from continued monthly bond purchases. The MSCI Emerging Markets Index rose 0.2 percent to 973.17. Egypt’s EGX 30 Index rallied to a three-year high, while Turkish shares sank after JPMorgan Chase & Co.’s downgrade. The won extended a rebound from a two-month low.

A faster-than-expected expansion in the world economy contrasts with the outlook in October, when the IMF lowered its expectation for the pace of expansion for 2014. Investors also watched data showing that American companies added more workers than projected in December, while German factory orders increased more than economists forecast in November.

“The global growth backdrop continues to be positive,” Maarten-Jan Bakkum, a senior emerging-markets strategist at ING Groep NV in The Hague, said by e-mail. “So far, EMs have not benefited much, but another confirmation that global growth is improving would help.”

The iShares MSCI Emerging Markets Index exchange-traded fund fell 0.3 percent to $39.78. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, added 2.6 percent to 23.60.

Brazil, Russia

The Ibovespa snapped a two-day drop as real estate companies including PDG Realty SA Empreendimentos & Participacoes rose after an increase in industrial production eased concern that Brazil’s recovery is faltering.

Russian stocks fell, extending their steepest loss in more than six months, as oil slid and better-than-expected U.S labor data signaled the possibility of an increase in the pace of monetary policy tapering. Oil producer OAO Lukoil and miner OAO GMK Norilsk Nickel slipped 1.7 percent and 2.3 percent, respectively. OAO Gazprom, the world’s biggest producer of natural gas, snapped a six-day losing streak.

Poland and Slovakia are selling euro-denominated notes today, following Ireland’s issue yesterday, to take advantage of lower yields before the U.S. Fed further reduces stimulus.

The Borsa Istanbul 100 Index slumped after JPMorgan cut Turkish stocks to underweight from neutral. “Higher rates, slower growth hurt while valuations not at trough,” JPMorgan analysts including David Aserkoff say in e-mailed report today.

Egypt, Dubai

Egypt’s EGX 30 climbed 1.3 percent as EFG-Hermes Holding SAE, the nation’s biggest investment bank, rose to a nine-month high after regulators said brokerage firms will be able to trade in government debt this year. Deyaar Development PJSC, the second-largest publicly traded property company in Dubai, gained to the highest in more than five years on growing investor confidence in the emirate’s real estate recovery.

The rand declined for the first time in three days, leading losses among 17 of the 24 developing-nation currencies tracked by Bloomberg. South Korea’s won rose on speculation exporters repatriated their overseas income to take advantage of a more favorable exchange rate.

The Shanghai Composite Index fell for the fourth time in five days on concern the resumption of initial public offerings will divert funds. Small-company equities rallied after the government started allowing insurers to invest in companies in the ChiNext Index. China Oilfield Services Ltd. slid 1.5 percent on plans to raise HK$5.88 billion ($758 million) through a private placement.

Coal India

Indian stocks climbed for the first time this year as materials producers and drugmakers advanced. Coal India Ltd. jumped the most in four months after the world’s biggest miner of the fuel said it will consider paying an interim dividend. Cipla Ltd. had the biggest increase since September and Sun Pharmaceutical Industries Ltd., the country’s most valuable drugmaker, climbed for the sixth day.

The premium investors demand to own emerging-market debt over U.S. Treasuries fell five basis points, or 0.05 percentage point, to 306 basis points, according to JPMorgan Chase & Co.

--Editors: Rita Nazareth, Matthew Brown