Emerging-Market Stocks Rise on China Outlook; Ibovespa Plunges

Aug 13, 2014 4:23 pm ET

Aug. 13 (Bloomberg) -- Emerging-market stocks rose a third day amid bets China and South Korea will take steps to support growth. The Ibovespa sank after Brazilian presidential candidate Eduardo Campos was killed in a plane crash.

The Shanghai Composite Index erased losses as investors weighed prospects for stimulus after disappointing economic data and the Kospi Index jumped 1 percent in Seoul. OAO Gazprom and OAO Lukoil led a rally in Russia as the lowest valuations among emerging markets attracted investors. The Ibovespa fell the most among the world’s biggest equity benchmarks.

The MSCI Emerging Markets Index added 0.6 percent to 1,070.40. China’s broadest measure of new credit unexpectedly plunged to the lowest level since the global financial crisis. The data spurred speculation that the government will increase stimulus in the world’s second-largest economy, with Premier Li Keqiang’s growth target of about 7.5 percent this year at risk.

“Investors are getting more confident on China,” Hertta Alava, head of emerging markets at FIM Asset Management Ltd. in Helsinki, said by e-mail. “Today’s economic numbers were slightly weaker, but nothing alarming, and targeted stimulus should keep growth at a relatively good level.”

The developing-nation gauge has risen 6.8 percent this year and trades at 11.2 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has gained 2.8 percent in the period, and is valued at a multiple of 14.7.

Russia Valuations

The Micex Index rallied 1.8 percent as energy stocks Lukoil and Gazprom rose more than 1.1 percent each. The gauge last traded at 5 times estimated earnings, compared with a multiple of 5.3 before Russia’s incursion into Ukraine’s Crimea peninsula.

“Stocks are still cheap,” Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki, said by e-mail. “More investors are realizing that one day, the crisis will be over and good opportunities to buy will be over too.”

Petroleo Brasileiro SA tumbled 5 percent, leading the Ibovespa’s 1.5 percent decline. The Brazilian government- controlled oil producer’s five-day volatility rose to 68 percent, the highest in two months. Stock prices of state-run companies have seen wide swings in recent weeks amid speculation a new president’s policies may bolster profitability.

The Shanghai Composite Index climbed 0.1 percent, while the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong rebounded 1.2 percent.

Aggregate financing was 273.1 billion yuan ($44.3 billion) in July, data showed, compared with the 1.5 trillion yuan median estimate of analysts. New local-currency loans were half of projections. Growth in industrial output also trailed estimates.

Czech Equities

The Czech Republic’s PX Index rallied 1.1 percent, while Hungary’s benchmark BUX Index added 2 percent after tumbling by the same amount yesterday.

Qatari stocks increased 1.8 percent to the highest level since June on bets MSCI Inc. will boost the nation’s weighting on the index provider’s developing-nation gauge, which is tracked by investors managing about $9 trillion in assets.

Nine of 10 industry groups in the developing-nation measure advanced, led by health care stocks. Cosmetics maker Amorepacific Corp. surged 4.4 percent in Seoul as IBK Securities Co. and Samsung Securities Co. raised their price estimates.

The Kospi index rose for a third day. The Bank of Korea will cut its benchmark interest rate tomorrow for the first time since May 2013, according to most analysts surveyed by Bloomberg.

The premium investors demand to own developing-country debt over U.S. Treasuries was little changed at 290 basis points, JPMorgan Chase & Co. indexes show.

--With assistance from Constantine Courcoulas in Istanbul.