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London - Emerging-market stocks climbed the most since August, almost erasing this week’s decline, as oil gained and speculation that central banks will expand stimulus spurred a revival of risk appetite. Russia’s rouble rebounded from an all-time low.
Energy companies paced gains in the MSCI Emerging Markets Index as Brent crude rallied 5.5% to cross $30 a barrel. Chinese stocks trading in Hong Kong advanced from a six-year low as PetroChina Company and China Shenhua Energy Company surged and the government signalled it will curb overcapacity in industries such as coal.
The rouble strengthened the most since August 27 after UBS Wealth Management predicted a rebound in this year’s worst- performing currency in the developing world.
Global policy makers are being pushed to act to counter the fallout from slumping commodities and China’s deepest economic slowdown since 1990 that’s roiled global markets. European Central Bank chief Mario Draghi indicated he may bolster economic support as soon as March, while Malaysia cut the amount of cash banks must set aside as reserves for the first time since 2009.
Developing-nation stocks have had their worst start to a year since 2008 with $2.5trn has been shaved off from the value of equities in 2016.
“We’re ripe for a technical rebound as the selloff in risk looks overdone,” said Michael Wang, a strategist at hedge fund Amiya Capital in London. “But the two elephants in the room, oil and China, still look pretty weak fundamentally, so it’s hard to buy this bounce with much conviction.”
The MSCI Emerging Markets Index climbed 3% to 709.01 at 11:34 a.m. in London. The gauge closed at the lowest since May 2009 on Thursday, sending valuations to the cheapest since March 2014. The 14-day relative strength index closed below 30 for a 12th day on Thursday.
After an 11% drop this year, developing-nation stocks trade, on average, at 10.4 times projected 12-month earnings, a 29% discount to advanced-country shares in the MSCI World Index, according to data compiled by Bloomberg.
Bonds also rebounded, with the premium investors demand to hold emerging-market debt over US Treasuries narrowing nine basis points to 470, according to JPMorgan Chase Indexes.
Stocks
PetroChina and China Shenhua, the biggest Chinese oil and coal producers, surged more than 7% in Hong Kong. Premier Li Keqiang called for supply-side policy changes and cutting overcapacity in the steel and coal industries, while the Economic Information Daily reported the government will provide 100bn yuan ($15bn) a year to help reduce capacity in those sectors.
The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong rallied 3.4%, paring a fourth weekly loss. The Shanghai Composite Index added 1.3%.
Stock indexes across Emerging Europe rallied. Polish gas company PGNiG SA jumped the most since in more than three years, leading a 2.6% rally in the nation’s equity gauge. Czech and Hungarian climbed more than 1.5% and Russia’s Micex Index was poised for the highest close since January 6.
Currencies
A Bloomberg gauge of emerging-market currencies climbed 0.9% to wipe out this week’s losses. The index is still trading near a record low. The rouble led the advance, climbing 4.4%to 79.15 per dollar after reaching an all-time low 85.999 yesterday.
Jorge Mariscal, the emerging-markets chief investment officer at UBS Wealth Management, which oversees $1trn, predicted on Thursday that the Russian currency will strengthen to 73 per dollar in the next three months.
The ringgit rallied by the most since October, while the South Korean won and Mexican peso jumped more than 1.1%. The offshore yuan headed for a second weekly advance after Chinese authorities stepped up their defense of the currency amid capital outflows and a slowing economy.
Bonds
Malaysia’s 10-year government bond yield dropped to an six- month low as Bank Negara lowered the amount of cash banks must set aside as reserves and opted to keep the benchmark overnight policy rate unchanged to save undermining the ringgit.
Russian 10-year local-currency bonds pared their loss this week, lowering the yield 23 basis points to 10.71% and trimming the yield increase in the past five days to 10 basis points.
* A previous version of this story was corrected to clarify that emerging stocks are having worst start to a year since 2008.
