Emerging-Market Stocks Advance Most in Week on Recovery Signs

Stocks rallied even as Bulgaria's industrial production posted its ninth consecutive annual drop in June, plunging 18.7 percent from a year earlier. Photo by Sofia Photo Agency

By Laura Cochrane
Bloomberg Agency

Emerging-market stocks rose, poised for the biggest gain in a week, as an increase in manufacturing in Japan boosted Asian shares and ING Groep NV said equities in developing nations may rally 15 percent.

The MSCI Emerging-Market Index gained 0.4 percent to 856.48 at 11:50 a.m. in London, heading for the biggest daily gain since Aug. 3. Pakistan's Karachi 100 index led the advance in Asia, adding 2.7 percent to the highest level since December after the country's inflation rate slowed in July more than economist estimated. Bulgaria's Sofix Index jumped 6.4 percent, the most among global equity markets, and Hungary's BUX Index climbed 2 percent.

Japan, the world's second-biggest economy, said machinery orders rose 9.7 percent in June from a month earlier, more than the 2.6 percent estimated by economists and the first gain in four months. Signs the world's largest economies are recovering from the global recession have lifted demand for higher-yielding assets, boosting emerging-market stocks 51 percent in 2009.

The MSCI index of 22 developing nations may rise to 983 in 12 months as earnings recover and valuations return to their 15- year average, Daniel Salter, a Moscow-based strategist at ING, wrote in a research report.

Consumer prices in Pakistan, South Asia's second-largest economy, rose 11.17 percent in July from a year earlier, the Federal Bureau of Statistics said. Slowing inflation gives the central bank scope to reduce interest rates to spur economic growth.

Bulgaria's Sofix Index climbed for an eighth day, headed for the longest winning streak in almost two years, on speculation Boiko Borisov's center-right government will restore economic growth. Stocks rallied even as Bulgaria's industrial production posted its ninth consecutive annual drop in June, plunging 18.7 percent from a year earlier.

Correction

Mark Mobius, executive chairman of Templeton Asset Management Ltd., said global stocks will drop as much as 30 percent after advancing from multiyear lows and as companies increase share sales.

"When you have these rapid increases, almost without correction, you will definitely have a correction at some point, so we can expect a lot of volatility," he said today in an interview in Kuala Lumpur.

The extra yield investors demand to own emerging-market bonds instead of U.S. Treasuries rose one basis point to 3.39 percentage points after dropping to an 11-month low Aug. 7.

 

 

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