Emerging-market stocks, bonds and currencies rallied as higher commodity prices and the first expansion in Chinese manufacturing in nine months boosted speculation the worst of the economic crisis may be over.
The MSCI Emerging Markets Index surged 5.5 percent to a seven-month high of 699.28 at 11 a.m. in New York. Brazil’s Bovespa jumped 5 percent, also reaching its highest level since October. In Eastern Europe, Poland’s WIG20 Index and Russia’s Micex added 4 percent. Taiwan’s Taeix index advanced 5.6 percent, extending its two-day gain to 13 percent, the biggest back-to-back rally in more than 18 years.
China’s manufacturing expanded after declines in export orders moderated and investment surged because of the government’s 4 trillion yuan ($586 billion) stimulus package. Copper and zinc futures climbed by the exchange-imposed 6 percent daily limit in Shanghai, helping boost revenue for emerging economies sustained by exports.
“The worst-case scenario is now on the backburner, and the future doesn’t seem as gloomy anymore,” said Rabih Sultani, hedge fund manager at Duet Mena Ltd., part of a group managing $2 billion globally. “Liquidity is slowly returning to the market as China proved more resilient.”
Emerging-market bonds gained, with Brazil’s 11 percent notes maturing in 2040 rising the most in almost two weeks. The yield to the 2015 call date on Brazil’s bond, one of the most widely traded emerging-market securities, fell 15 basis points to 5.57 percent, according to JPMorgan Chase & Co. A basis point equals 0.01 percentage point. The bond’s price rose 0.90 cent on the dollar to 128.40 cents.
Mexico’s peso paced gains in emerging-market currencies, climbing 3.7 percent to 13.2687 per dollar. Peru’s sol rose 2.6 percent, while Chile’s peso strengthened 2.1 percent. South Africa’s rand jumped 2.7 percent.
Stocks from developing nations may “break out” into a bull market at the end of the year as falling interest rates and easing inflation make equities more attractive, Templeton Asset Management Ltd.’s Mark Mobius said yesterday in an interview.
Gerdau SA, Latin America’s biggest steelmaker, rose 7.3 percent to 16.84 reais. Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-biggest steelmaker, rose 4.7 percent, while third-biggest Cia. Siderurgica Nacional SA added 5.4 percent to 42.07 reais.
In Eastern Europe, KGHM Polska Miedz SA, Poland’s only copper producer, rose 6.2 percent gain, while OAO GMK Norilsk Nickel gained 4.2 percent.
The Association of Southeast Asian Nations, together with Japan, China and South Korea, said they will start a $120 billion foreign-currency reserve pool by the end of the year to help revive investor confidence. The pledge was agreed upon at a weekend meeting in Bali, Indonesia.