Tags: Emerging | Stocks | Gain | China

Emerging Stocks Cap 15% Annual Gain as China Manufacturing Grows

Monday, 31 Dec 2012 10:50 AM

 

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Emerging-market stocks rose, adding to a 15 percent advance in 2012, as Chinese manufacturing expanded more than forecast and a deadline approached for U.S. lawmakers to avert automatic tax increases and spending cuts.

Zhuzhou CSR Times Electric Co., which supplies electrical systems for China’s railways, gained for a fourth day. China Life Insurance Co. jumped the most in three weeks as the nation’s securities watchdog said insurers would be allowed to set up mutual funds. Lenovo Group Ltd., the world’s biggest maker of personal computers, fell to a five-week low after the chief executive officer cut his stake. China’s Shanghai Composite Index climbed to a six-month high, while Mexico’s IPC Index fell the most in almost two weeks.

The MSCI Emerging Markets Index increased 0.1 percent to 1,056.24 by 9:40 a.m. in New York, as consumer staples and discretionary companies led gains and falling oil prices suppressed energy stocks. Chinese factory output grew at the fastest pace in 19 months, HSBC Holdings Plc and Markit Economics said today. The U.S. Congress is working to avert more than $600 billion in tax increases and federal spending cuts, known as the so-called fiscal cliff, as the year-end deadline looms.

“We’re getting farther away from this fear of a hard landing in China and getting closer to some kind of meaningful recovery in rate of growth of the world’s second-largest economy,” Michael Gayed, the chief investment strategist at Pension Partners LLC, said by phone from New York.

Chinese Recovery

Equity markets in Russia, Hungary, Poland, the Czech Republic, South Korea, Taiwan, Indonesia, Thailand and the Philippines were closed for holidays. Markets in Brazil, Chile and Argentina were also closed.

The 21 nations in the developing-nations gauge send about 17 percent of their exports to the U.S. on average, World Trade Organization data show. Allowing the tax increases and spending cuts to take effect would cause a recession in the first half of 2013, according to the U.S. Congressional Budget Office.

“Most traders have their eyes on the U.S. fiscal cliff and how it unfolds,” said Alex Mathews, the head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi, South India.

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, added 0.3 percent to $43.83. The ETF has gained 16 percent this year. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, jumped 4.5 percent to 24.08.

Zloty Leads

The Shanghai Composite of domestic Chinese shares climbed 1.6 percent to its highest level since June 20. The gauge jumped 15 percent this month, the most since July 2009. The BSE India Sensitive Index, or Sensex, slipped less than 0.1 percent for a 26 percent gain in 2012. The FTSE Bursa Malaysia KLCI Index gained 0.5 percent to a record, led by a 9.4 percent surge in Kuala Lumpur Kepong Bhd.

India’s Sensex had the biggest gain this year among the so- called BRIC nations, while the Shanghai Composite was the worst performer with a 3.2 percent increase. Brazil’s Bovespa Index rose 7.4 percent and Russia’s Micex Index added 5.4 percent.

Mexico’s IPC Index sank 0.5 percent today, the biggest decline in almost two weeks. Compartamos SAB, the holding company that controls low-income lender Banco Compartamos SAB, led declines on the gauge, slumping 1 percent.

South Korea’s won advanced 0.6 percent against the dollar in offshore trading today after inflation slowed, extending this year’s advance to 8.3 percent. Poland’s zloty led gains among major emerging market currencies in 2012, climbing 9.6 percent versus the euro and 12 percent against the dollar. Argentine’s peso has dropped 13 percent this year, the worst performance among developing-nation currencies.

Utilities Drop

PT Bumi Resources, which slumped 73 percent in Jakarta in 2012, was the worst performer on the MSCI Emerging Markets Index for the year. Its parent, Bumi Plc, is at the center of a dispute between its founders Nathaniel Rothschild and Indonesia’s Bakrie Group.

United Spirits Ltd., India’s largest distiller, had the biggest gain on the MSCI gauge this year after climbing 286 percent. Diageo Plc said in November it will buy a controlling stake in United Spirits for $2.04 billion.

Health-care companies rose the most among the 10 industry groups in the MSCI index of developing nations, rallying 32 percent this year, while utilities were the worst performers with a 2.4 percent advance. Brazilian power companies led utility declines as lawmakers intervened to cut tariffs, with Centrais Eletricas Brasileiras SA, the state-controlled power generator, sinking 65 percent to a record low in 2012.

China PMI

Zhuzhou CSR, based in Hunan, China, jumped 4.7 percent in Hong Kong today. The final reading of a Purchasing Managers’ Index for China was 51.5 in December, according to data released today by HSBC and Markit Economics. That compares with a 50.9 preliminary reading issued Dec. 14 and a final 50.5 in November. A reading above 50 indicates expansion.

China Life Insurance rose 3.1 percent in Hong Kong, its third day of gains. New China Life Insurance Co. added 2.6 percent and Ping An Insurance (Group) Co. gained 1.9 percent.

The China Securities Regulatory Commission posted draft rules on its website yesterday allowing insurers’ asset management units and securities brokerages to set up mutual funds, a move the regulator said seeks to “attract various funds into the capital market.”

Lenovo sank 2.2 percent in Hong Kong, its second day of losses after Chief Executive Officer Yang Yuanqing sold 29 million shares of the company.

Emaar Properties PJSC, developer of the world’s tallest skyscraper, dropped 1.6 percent, the most in two weeks. The United Arab Emirates, where foreigners make up more than 80 percent of the population, issued guidelines to restrict mortgages for expatriates to 50 percent of property value, according to guidelines issued by the central bank yesterday and obtained by Bloomberg News.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries was unchanged at 271, according to JPMorgan Chase & Co.’s EMBI Global Index.

© Copyright 2014 Bloomberg News. All rights reserved.

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