Emerging Stocks Rise as Rate Cut Spurs China Rally; Ruble Gains

By Natasha Doff and Harry Suhartono  

Emerging-market stocks rose for a fifth day as China’s unexpected interest-rate cut spurred the biggest rally in Hong Kong-traded mainland companies in a year. Rising oil prices boosted energy producers and Russia’s ruble.
China Vanke Co. (2202) soared 13 percent to lead gains for developers in Hong Kong as the Hang Seng China Enterprises Index jumped 3.8 percent. Chinese bonds climbed, sending the 10-year yield down by the most since 2008, while the yuan lost 0.3 percent versus the dollar. The ruble headed for the longest stretch of advances in 14 months as oil traded above $80 a barrel in London. Russia’s dollar-denominated RTS Index climbed 1.8 percent.
The MSCI Emerging Markets Index added 0.9 percent to 1013.36 at 11:21 a.m. in London, the longest rally in three months. China cut benchmark interest rates for
the first time since July 2012 to support the world’s second-largest economy, placing the nation’s central bank on the side of the European Central Bank and Bank of Japan in deploying fresh stimulus.
“The rate cut in China has improved emerging-market sentiment,” Martial Godet, the head of emerging-market equity and derivatives strategy at BNP Paribas SA in Paris, said by e-mail. “An indirect consequence is the depreciation of the yuan this morning, which will support Chinese exports.”
An index tracking 20 developing-nation currencies climbed for a third day. The ruble jumped 2.2 percent to 44.7445 per dollar for a sixth day of increases. Russian companies, including exporters with dollar and euro-based revenue, are due to pay about 475 billion rubles ($10.7 billion) in taxes this week, according to analysts surveyed by Bloomberg.

Ruble Shorts

For the second week running, hedge funds and other speculators pared bets the ruble will weaken versus the dollar, with net short positions cut to 3,605 on Nov. 18 from 4,082 on Nov. 11, according to Commodity Futures Trading Commission data.
The emerging-markets gauge has risen 1.1 percent this year and trades at 11.3 times 12-month projected earnings, data compiled by Bloomberg show. The MSCI World Index has gained 4.6 percent and is valued at a multiple of 15.4.
Stock indexes in Poland and the Czech Republic advanced at least 0.4 percent, while Turkish shares lost 0.4 percent, trimming this month’s advance to 2.9 percent. The country’s assets have benefited from the bear market in Brent crude since Turkey is a net oil importer.
Brent, the benchmark for more than half the world’s oil, climbed as much as 0.6 percent to $80.85 a barrel before trading little changed at $80.37.

China Rates

Nine out of 10 industry groups in the MSCI Emerging Markets Index rose, led by financial, material and energy companies. Cnooc Ltd. gained 3.2 percent, while China Vanke advanced the most on record.
China’s one-year lending rate was reduced by 0.4 percentage point to 5.6 percent, while the one-year deposit rate was lowered by 0.25 percentage point, the central bank said on Nov. 21 after the market closed.
The Shanghai Composite Index increased 1.9 percent to the highest close since September 2011. The yield on China’s 10-year bond dropped the most since October 2008 while the yuan weakened for a third day.
The FTSE Bursa Malaysia KLCI Index (FBMKLCI) climbed 1.4 percent, the most since August 2013, led by a 5.6 percent surge in Felda Global Ventures Holdings Bhd. The government announced Nov. 21 it will remove fuel subsidies from Dec. 1.
The premium investors demand to own emerging-market debt over U.S. Treasuries narrowed one basis point to 303 basis points, JPMorgan Chase & Co. indexes show.