Emerging-market stocks rose from a two-week low as slower-than-estimated expansion in China’s economy and a lower growth target from South Korea’s central bank fueled speculation about more economic stimulus.
The MSCI Emerging Markets Index added 0.8 per cent to 921.01 as of 9:27 a.m. in London, halting a seven-day slide. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong rose 0.8 per cent, rallying from the lowest level since October. Industrial & Commercial Bank of China Ltd. gained the most in two weeks in Hong Kong after Chinese new lending in June exceeded forecasts. Russia’s Micex Index advanced for the first time in three days as oil gained, while Poland’s WIG20 Index gained the most in a week.
China’s gross domestic product expanded 7.6 per cent last quarter from a year earlier, the slowest pace since 2009, putting pressure on Premier Wen Jiabao to take steps to secure a second-half economic rebound. The Bank of Korea reduced its 2012 economic-growth forecast for the second time this year, a day after it unexpectedly cut interest rates.
“In Asia, authorities seem to be busy downgrading their growth forecast,” Benoit Anne, head of emerging markets research at Societe Generale SA in London, wrote in an e-mailed note today. “That means that we expect Asian central banks to shift to a more dovish stance going forward.”
MSCI’s index of developing nations has tumbled 10 per cent in the past three months as data worldwide pointed to a slowing global economy and European policy makers wrangled over solutions for the region’s debt crisis. The gauge trades at 10 times estimated profit, lower than its three-year average of 12.1 times, according to data compiled by Bloomberg.
South Korea’s Kospi index jumped 1.5 per cent and Vietnam’s VN Index increased 2 per cent, the most since May. India’s rupee gained 1.1 per cent against the dollar, the most among 25 emerging-market currencies tracked by Bloomberg.
China’s central bank may cut interest rates once or twice more this year and reduce the reserve-requirement ratio two or three more times in 2012, the China Daily reported, citing Zhu Baoliang, chief economist at the State Information Center. Economic growth will rebound in the third quarter after hitting a bottom the previous quarter, according to the report. The government cut rates on July 5 for a second time in a month.
Bank of America Merrill Lynch predicted a total of three 50 basis points of cuts in the China rate before the year end, with the next one expected imminently, analysts Ting Lu, Xiaojia Zhi and Weijun Hu wrote in a note to clients.
Russia’s Micex Index gained 0.9 per cent. South Africa’s FTSE/JSE Africa All Share Index gained 0.5 per cent and Poland’s WIG20 Index rose 0.7 per cent.
Azoty Tarnow, Poland’s largest chemicals maker, jumped 4.6 per cent to the highest level in two weeks after OAO Acron of Russia increased its bid for the company. Polimex-Mostostal SA, Poland’s second-largest builder, dropped 3.8 per cent to the lowest level in more than a week after saying yesterday it started talks with creditors to extend repayment of bonds and loans by four months.
OAO Rostelecom, Russia’s long-distance phone operator, gained for the first time in three days, advancing 2.6 per cent as first-quarter profit jumped after broadband and paid television subscribers increased.
ICBC, China’s biggest listed lender, gained 0.8 per cent in Hong Kong, after a five-day slide. Bank of China Ltd. added 0.7 per cent. Banks extended 919.8 billion yuan ($144 billion) of new loans in June, according to People’s Bank of China data. That compares with the 880 billion yuan median forecast in a Bloomberg News survey and 793.2 billion yuan in May.
Chinese Airlines Climb
China Southern Airlines Co. gained 8.4 per cent in Hong Kong, the most since October, after the Shanghai Daily said the government may set up investment companies to buy stakes in domestic carriers. China Eastern Airlines Corp. jumped 6.9 per cent.
In Seoul, South Korea’s central bank said the nation’s economy will expand 3 per cent this year, compared with a 3.5 per cent prediction made in April and a 3.7 per cent forecast in December. Consumer prices are expected to rise 2.7 per cent, down from an earlier forecast of a 3.2 per cent gain.
Hyundai Motor Co. jumped 3.4 per cent, its biggest one-day gain since June 18. The company’s union, which ended discussions with management on June 28, agreed to resume negotiations on July 18, raising optimism Hyundai Motor will avert work stoppages that would dent earnings.
Samsung Electronics Co., the world’s largest maker of televisions and mobile phones, climbed 4.4 per cent, rebounding from a five-month low.
Tata Consultancy Services Ltd. advanced 1.9 per cent, the most in a week, leading gains among technology shares after reporting profit in the three months ended in June climbed 38 per cent to 32.8 billion rupees ($590 million). Analysts had estimated profit of 31.8 billion rupees.
A measure of information technology service companies in the MSCI Emerging Markets Index climbed 1.2 per cent, the best performer of 10 industry groups on Friday.