Market Watch: Emerging-Market Stocks Advance With Volatility at 11-Year Low

LAGOS, Nigeria, Capital Markets in Africa: Emerging-market stocks rose toward the highest level since China’s currency devaluation last year, while volatility fell to an 11-year low, on optimism earnings are improving and central banks remain supportive of growth.

Egyptian stocks rallied the most in the world after the government said it’s nearing the final stages of talks for an International Monetary Fund loan. Turkey’s benchmark index headed for a one-week high, rising with the country’s bonds and currency, on signs a political crisis is easing. South Africa’s rand led gains among peers. Russian government bonds advanced before a debt auction, their first gain in 11 days.

More than half of developing-nation companies that have reported financial results for the last quarter have beaten estimates, following similar positive momentum in the U.S. and Europe. Japanese Prime Minister Shinzo Abe announced plans for more than 28 trillion yen ($265 billion) in economic stimulus in an effort to prop up the nation’s economy. His announcement came hours before the Federal Reserve discusses the path of its monetary policy.

“We have good figures and more stimulus,” said Hertta Alava, the head of emerging markets at FIM Asset Management Ltd. in Helsinki, who favors Russian equities. “That is enough for stock markets to keep on going. We have some good results from the U.S. and Europe and even U.K. gross domestic product surprised positively.”

Stocks
The MSCI Emerging Markets Index climbed 0.4 percent to 873.86 at 10:40 a.m. in London, heading for the highest since Aug. 11 and tracking gains in Europe after the U.K. reported second-quarter growth that was quicker than estimated. Eight of the 10 industry subgroups on the developing-nation gauge rose, led by technology companies.

The benchmark EGX 30 Index in Cairo advanced 4.6 percent, heading for the highest level since Aug. 12, after the Egyptian cabinet said the central bank governor and finance minister will finalize negotiations with an IMF delegation within a few days. Authorities are targeting $7 billion annually over three years under the program. Of that, the government plans to secure $12 billion from the IMF and the rest from bilateral accords and international institutions.

The Borsa Istanbul 100 Index rose 1 percent, gaining for the third time in four days. President Recep Tayyip Erdogan is considering withdrawing cases against opposition leaders to show his solidarity among politicians in the wake of the July 15 coup attempt, his press office said. Separately, Erdogan plans to meet Russian President Vladimir Putin to mend bilateral ties ruptured by the downing of a Russian war plane in November.

Chinese stocks retreated after a report in the 21st Century Business Herald said the country’s banking regulator is considering tightening curbs on the $3.6 trillion market for wealth-management products. The Shanghai Composite Index closed down 1.9 percent.

Currencies
The MSCI Emerging Markets Currency Index climbed 0.1 percent, ending three days of declines. The rand strengthened 0.6 percent against the dollar and the lira rebounded from yesterday’s loss.

Malaysia’s ringgit posted the biggest losses among currencies, falling 0.4 percent, amid lingering concern over several international probes into alleged wrongdoing at state fund 1Malaysia Development Bhd.

Bonds
The yield on 10-year year ruble bonds, known as OFZs, fell two basis points to 8.67 percent, the first decrease since July 12. The notes are helped by the currency’s stability thanks to support from exporters, said Nikolay Minko, an analyst at Sberbank CIB, the investment-banking arm of the nation’s biggest lender.

The premium investors demand to own emerging-market sovereign debt over U.S. Treasuries narrowed one basis points to 359, according to JPMorgan Chase & Co. indexes.

Source: Bloomberg Business News