Emerging stocks rally
Emerging-market stocks rise toward a two- month high and currencies rally on bets the US will keep rates lower for longer.
|||Shanghai - Emerging-market stocks rose toward a two- month high and currencies rallied as bets that the US will keep interest rates lower for longer spurred demand for riskier assets from China to Turkey.
The Shanghai Composite Index jumped to an eight-week high after a government move to reorganize the telecommunications industry raised speculation policy makers will accelerate reforms of state-owned companies. AngloGold Ashanti Ltd. headed for a five-month high in Johannesburg as the South African rand strengthened for a second day. The Turkish lira and Russia’s ruble added at least 0.9 percent versus the dollar, each rising for a second day. Indonesia’s rupiah strengthened 1.4 percent before an announcement of more stimulus measures.
The MSCI Emerging Markets Index added 2.1 percent to 866.99 at 12 p.m. in London, halting a two-day drop. Weaker-than- estimated US retail sales on Wednesday bolstered speculation that the Federal Reserve will continue to refrain from raising the near-zero borrowing costs that have supported demand for riskier assets. Odds that the Fed will increase rates in December dropped to 27 percent from 41 percent at the end of September, while the chance of liftoff this month plunged to 4 percent.
“The markets are taking hints from the recent U.S. data, which has been weakish, and also the Fed comments,” Aurelija Augulyte, a senior foreign-exchange strategist at Nordea Markets in Copenhagen, said. “It is increasingly obvious the Fed is split in their views, maybe more than ever, which makes a 2015 hike close to impossible in the markets’ view. This keeps the U.S. dollar yields low and reduces the financing risks for emerging markets.”
Stock valuations
The developing-markets index has lost 9.4 percent in 2015 and is trading at 11.4 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has declined 2.8 percent in the period and is valued at a multiple of 15.5.
The premium investors demand to own emerging-market debt over US Treasuries narrowed two basis points to 408 on Thursday, according to JPMorgan Chase & Co indexes.
All 10 industry groups in the emerging-stocks measure rose, paced by technology and materials companies. Taiwan Semiconductor Manufacturing Co. advanced 2.6 percent to the highest close in almost three months, leading gains among technology companies. AngloGold Ashanti climbed 2.2 percent, while GMK Norilsk Nickel PJSC added one percent in Moscow. Shares in Russia and Turkey increased at least 0.9 percent.
The Shanghai Composite Index surged 2.3 percent and the Hang Seng China Enterprises Index rose 2.1 percent. China Mobile Ltd. climbed 2.7 percent in Hong Kong. The government injected 231.4 billion yuan ($36 billion) of network assets such as base stations into a new company called China Tower Corp.
Development plan
The Communist Party will hold a key meeting during Oct. 26-29 to deliberate on an economic and social development plan for China over the next five years, according to the official Xinhua News Agency.
The Jakarta Composite Index gained 0.5 percent and the rupiah appreciated 1.2 percent, the most since October 9.
Indonesia will announce stimulus measures on Thursday, including a formula for regular minimum wage increases for better business certainty, Coordinating Minister for Economic Affairs Darmin Nasution said on Monday. Bank Indonesia will hold its policy rate at 7.5 percent on Thursday, according to all 25 economists surveyed by Bloomberg.
-With assistance from Kana Nishizawa in Hong Kong.
BLOOMBERG