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Emerging stocks advance on Chinese bank rally

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(Bloomberg) — Emerging-market stocks climbed to a two-week high as Chinese financial shares surged on brokerage recommendations and rising gold prices lifted producers. Kazakhstan’s tenge tumbled after the nation’s central bank devalued the currency.

China Minsheng Banking Corp. and China Construction Bank Corp. rose at least 3.1 percent in Hong Kong after JPMorgan Chase & Co. recommended buying the nation’s lenders. Harmony Gold Mining Co. added 2.2 percent in Johannesburg as gold rallied to the highest level since November. Kazakhstan’s currency tumbled 16 percent to 185.89 tenge per dollar.

The MSCI Emerging Markets Index gained 0.6 percent to 941.21 as of 4:10 p.m. in Hong Kong, poised for the highest close since Jan. 24. Chinese stocks will probably rally as much as 20 percent in the coming weeks as gauges of economic growth stabilize and valuations rise from historic lows, JPMorgan said. Goldman Sachs Group Inc. Chairman and Chief Executive Officer Lloyd C. Blankfein said China’s economic growth will have “huge consequences” for global expansion prospects.

“The JPMorgan report is a trigger point for investors to come in after some disappointing economic data recently,” Jeffrosenberg Tan, a fund manager at Jakarta-based PT Sinarmas Asset Management, said by phone today.

Federal Reserve Chairman Janet Yellen will deliver her first semi-annual monetary-policy testimony as investors weigh the pace of stimulus reductions against data this week that may show U.S. retail sales stalled while jobless claims declined.

The emerging markets gauge has declined 6.1 percent this year and trades at 9.2 times projected 12-month earnings. The MSCI World Index has fallen 2.4 percent in 2014 and is valued at 14.5 times, data compiled by Bloomberg show.

The Hang Seng China Enterprises Index surged 2.5 percent, the most since Nov. 18. It has dropped 8.9 percent this year, sending its valuation to a 32 percent discount versus the five-year average, as an official manufacturing index for January signaled a slowdown in the world’s second-largest economy.

The purchasing managers’ index tends to show higher readings in March and April, Michael Yu, a strategist at JPMorgan in Hong Kong, wrote in a report dated yesterday.

Eight out of 10 industry groups in the MSCI Emerging Markets Index gained, led by financial and technology stocks. China Minsheng Banking and China Construction Bank both rose the most since Nov. 18.