Emerging stocks rise to 3-month high as bonds gain on Fed
Emerging-market stocks rose to a three-month high, bonds advanced and currencies strengthened as Lawrence Summers withdrew his bid to become Federal Reserve chairman and the U.S. agreed on a plan with Russia to eliminate Syria’s chemical weapons.
The MSCI Emerging Markets Index climbed 1.4 percent to 1,000.42 at 9:53 a.m. in London, heading for the highest level since June 4. Equity gauges in the Philippines, Thailand, Turkey and Indonesia rose at least 2 percent. The yield on Indonesia’s 10-year debt tumbled 29 basis points to 8.07 percent and Turkey’s two-year note rate dropped to a five-week low. The South Korean won strengthened to a six-month high, while the lira rose 1.6 percent against the dollar, Bloomberg reports.
Summers, a former Treasury secretary, would tighten Fed policy more than Janet Yellen, who was his main rival to replace Chairman Ben S. Bernanke, according to a Bloomberg Global Poll last week. More than $47 billion left global funds investing in emerging-market bonds and stocks from May through August amid concern that reduced Fed stimulus would erode demand for riskier assets. Foreign investors added to Korean equity holdings today for a 17th day, while Taiwan inflows reached a two-month high.
“The fact that Summers is out of the race is positive for markets,” Peter Elston, the Singapore-based head of Asia-Pacific strategy at Aberdeen Asset Management, which oversees about $318 billion, said in an interview today. The announcement “is positive for flows into the region.”
The MSCI emerging markets index has advanced 106 percent since the Fed’s first round of bond-buying, known as quantitative easing, in 2008. The gauge is valued at 11 times projected earnings for the next 12 months, versus 14 times for the MSCI World Index of developed-nation shares, according to data compiled by Bloomberg.
Taiwan Semiconductor Manufacturing Co.b (2330), the world’s largest maker of custom chips, increased 2.9 percent and contributed most to Monday’s rally in the MSCI emerging markets index. Samsung Electronics Co. (005930), the biggest smartphone maker, was the second-largest contributor with a 1.4 percent gain to the highest level since June 10.
Foreign investors bought a net $454 million of South Korean stocks today and they purchased $450 million in Taiwan, according to exchange data compiled by Bloomberg.
“The stage is being set for emerging markets to do better and the Summers thing in the short-term can provide some boost,” Stefan Hofer, an economist at Bank Julius Baer & Co., which oversees $406 billion of client assets globally, said in a phone interview. Asia offers the best prospects as there is the added benefit of an improving Chinese economy, he said.
Turkey’s Borsa Istanbul National 100 Index (XU100), the Philippine Stock Exchange Index and Thailand’s SET Index each gained 2.8 percent. The Hang Seng China Enterprises Index increased 1.6 percent to the highest level since May.
Dubai’s DFM General Index rose 0.2 percent, extending a 4.8 percent rally yesterday. U.S. Secretary of State John Kerry will meet with French President Francois Hollande and his counterparts from France and the U.K. as he tries to build support for the Syria plan.
Kerry may also meet with ministers from Turkey and Saudi Arabia, both backers of the rebel forces seeking to topple Syrian President Bashar al-Assad. The discussions come as the United Nations prepares to release, as early as today, an inspection team’s report on a chemical weapons attack in Syria that the U.S. says killed more than 1,400 people.
India’s S&P BSE Sensex index dropped 0.3 percent after earlier rallying as much as 1.8 percent. The country’s inflation unexpectedly accelerated to a six-month high in August as the rupee’s slide stoked import costs, according to Commerce Ministry data today.
Ranbaxy Laboratories Ltd. (RBXY), India’s largest drugmaker, plunged a record 29 percent after the U.S. Food and Drug Administration issued an import alert on one of its facilities. Krishnan Ramalingam, a company spokesman, said he couldn’t immediately comment on the FDA statement when reached by telephone.
India’s rupee rallied 1.4 percent against the dollar, heading for the strongest level since Aug. 16. The South African rand gained 1.6 percent and Russia’s ruble increased 0.7 percent. The Hungarian forint strengthened 0.5 percent versus the euro.
Big Read |