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London - Emerging-market stocks advanced for the fifth time in six days as investors bet improving growth prospects will bring greater gains for companies closely tied to economic changes such as consumer-goods makers and financial institutions.
A strengthening dollar weighed on currencies.
OTP Bank Nyrt., Hungary’s largest lender, lifted the BUX Index to a two-week high, while Samsung Electronics jumped after announcing plans to sell shares in drugmaker Samsung Biologics.
Indian equities rose for a third day as the central bank cut interest rates on Tuesday. The won led developing-nation currencies lower as data showing expansion in US manufacturing and hawkish comments from Federal Reserve officials fueled wagers for an interest-rate increase this year.
“The move has support from cyclicals,” said Larry Hatheway, the chief economist at GAM in London, referring to stocks that rise when expectations for growth increase. “It represents some of the rotation away from what has worked earlier this year in emerging markets.”
Commodity producers and energy stocks have led a 15% rally in the MSCI Emerging Markets Index this year, sending valuations to 12.5 times estimated 12-months earnings. This compares with a multiple of 16 for the developed-market benchmark, which has added 3.7%.
While the Fed’s demonstrated commitment to a slow pace of rate hikes boosted appetite for riskier assets, bets on the probability of a US rate move in December have increased to 60%, compared with 37% two months ago.
Stocks
The MSCI Emerging Markets Index climbed 0.4% to 915.22 by 13:22. Samsung Electronics, the biggest contributor to the advance, added 1%. The maker of Galaxy mobile phones plans to sell 5.5 million shares in Samsung Biologics in an initial public offering in South Korea.
OTP Bank rose 3% after JPMorgan upgraded the price target for the stock by 31% on profit outlook and added OTP to a list of preferred shares. The benchmark gauge added 1.7%, extending Monday’s advance.
Naspers advanced in South Africa after two days of losses. LPP, Poland’s largest clothing retailer, headed for the biggest two-day gain since it sold shares to the public in 2001 after saying on Monday sales advanced 20% from a year earlier.
PZU, Poland’s largest insurer, rose the most in seven months in Warsaw trading after CEO Michal Krupinski said the company may pay a dividend at the higher end of its range despite its acquisition plans.
The Sensex added 0.3%, extending Monday’s 1.4% gain, after the Reserve Bank of India’s monetary policy committee unanimously voted to lower interest rates. The benchmark was cut to 6.25% from 6.50%, the lowest since January 2011.
China Evergrande climbed 8.2% in Hong Kong, its steepest advance in a year, after the developer announced a plan to inject assets into a property company listed on the Chinese mainland, taking advantage of higher valuations there. Markets in mainland China are closed all week for holidays.
Currencies
The MSCI Emerging Markets Currency Index slipped 0.1%. The South Korean won weakened 0.6% versus the dollar, while the Turkish lira lost 0.5%.
Russia’s rouble depreciated 0.3%, halting its two-day advance, as Brent crude fell to $50.61 a barrel.
India’s rupee strengthened 0.2%, holding on to its gains for a third day.
Bonds
The premium investors demand to own emerging-market debt over US Treasuries narrowed one basis point to 332, according to JPMorgan indexes. South African bonds due 2026 rose, sending yields down seven basis points to 8.51%.
South Korea’s 10-year government bonds fell for the first time in eight days, pushing the yield up five basis points to 1.46%. A report Tuesday showed the country’s current-account surplus narrowed to $5.51bn in August, the smallest since April, from a revised $8.67bn the previous month.
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