Emerging-market stocks headed for their strongest week since March as data showed China’s economy expanded more than forecast amid prospects for looser monetary policy worldwide.
Telecommunications and consumer-discretionary companies lifted the MSCI Emerging Markets Index toward an eight-month high. A gauge of mainland Chinese equities posted best weekly gain in four months. Taiwanese stocks entered a bull market. The premium investors demand to own emerging-market bonds rather than U.S. Treasuries was the narrowest in a year. Developing-market currencies fell, led by Russia’s ruble and the Hungarian forint.
Emerging-market stocks rose to their highest valuations in more than a year as investors bid up shares on bets some of the world’s biggest economies will act to limit the fallout from Britain’s vote to leave the European Union. Foreign funds have bought almost $4 billion of equities this week in India, Indonesia, the Philippines, South Korea, Taiwan and Thailand, data compiled by Bloomberg show.
“The window for emerging markets is extending,” said Bhanu Baweja, the London-based head of emerging-market cross-asset strategy at UBS. “‘You’re getting so much good news from elsewhere. China was the one thing that could have scuppered the good news for emerging markets, and this data doesn’t suggest that time is now.”
China’s gross domestic product rose 6.7% in the second quarter from a year earlier, compared with a projection of 6.6% in a Bloomberg survey, and in line with the government’s growth target of at least 6.5% for the full year.
Bank of England Chief Economist Andy Haldane said on Friday policy easing will likely be required in August to “protect the economy.”
The MSCI Emerging Markets Index added 0.2% to 867.19 at 11:06 a.m in New York, bringing gains in the past seven trading sessions to 6.1%. Its 14-day relative-strength index climbed to 66, approaching the threshold of 70 that some traders see as a signal that a rally is about to reverse.
The developing-nation equity gauge has advanced 9.3% this year and trades at 12.3 times its 12-month projected earnings, the highest level since May 2015. The MSCI World Index has gained 2.4% and is valued at a multiple of 16.2.
Taiwan Bull Market
Seven out of 10 industry groups in the emerging-market benchmark rose. Largan Precision Co. jumped 9.9% in Taipei. The benchmark Taiex index climbed 0.9% to close more than 20% above a three-year low touched on Aug. 24, as global investors poured cash into the island’s equities, drawn by upbeat earnings.
Samsung Electronics Co. rose 1.2% to a three-year high in Seoul. The Korean company is in talks with BYD Co. about investing in the Chinese electric-car manufacturer. BYD jumped 5.2% in Hong Kong.
The Hang Seng China Enterprises Index of mainland stocks listed in Hong Kong increased 0.4%, taking gains this week to 6%, while the Shanghai Composite Index posted its third weekly advance.
The Chinese data suggests the economy is responding to stepped up monetary and fiscal policy support. Speculation that central bankers will boost stimulus has underpinned equities in recent weeks, with mainland shares ranking among the world’s best performers since Britain’s June 23 vote to leave the European Union.
The Jakarta Composite Index climbed 0.5% after Indonesia’s June exports data came in better than economists estimated. Philippine stocks reached the highest level in 15 months, while stock gauges in Malaysia and South Korea rose at least 0.4%. Infosys Ltd. tumbled 8.8% in Mumbai, the most since April 2013, after the Indian software exporter cut its annual sales forecast. The S&P BSE Sensex slid for the first time in five days. The Sensex entered a bull market on Monday, rebounding 21% from a low reached in February.
The PX Index in Prague rose 2.2% to a five-week high as Erste Group Bank AG and O2 Czech Republic gained. Poland’s WIG20 added 0.8%, on pace for the biggest weekly advance since February. The Ibovespa slipped 0.2% after Brazilian equity valuations reached a two-year high.
The MSCI Emerging Markets Currency Index declined 0.2% on Friday, reducing its weekly advance of 1%.
“There is a degree of week-end profit-taking in currencies after another decent rally this week,” said Christopher Shiells, a senior emerging-markets analyst at Informa Global Markets. “We just need some extra risk impulses to get the rally going again.”
The ruble declined 0.9% against the dollar. Hungary’s currency, the Mexican peso and the South African rand each dropped 0.8%. Brent crude was little changed after reversing a 1.5% decline as Exxon Mobil Corp. declared force majeure on shipments of Nigeria’s biggest crude export grade.
The spread on emerging-market bonds over U.S. Treasuries fell five basis points to 350, heading for a decline of 27 basis points this week, according to JPMorgan Chase & Co. indexes.
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