Emerging Markets Emerging stocks head for weekly advance before Yellen’s speech

by **Cals** Sun 29 May 2016, 23:52

Emerging Markets

[size=28]Emerging stocks head for weekly advance before Yellen’s speech

By Bloomberg / Bloomberg | May 27, 2016 : 5:03 PM MYT

MANILA (May 27): Emerging-market stocks rallied, with the regional benchmark gauge headed for the first weekly gain in more than a month, as investors awaited comments from the head of the Federal Reserve that may shed more light on the outlook for US borrowing costs.

The MSCI Emerging Markets Index rose to a three-week high as Indian and Taiwanese shares powered advances in Asia. Indian stocks were the best performers this week in Asia as corporate earnings improved. Advanced Semiconductor Engineering Inc rallied the most since 1995 in Taipei after a merger, helping send the Taiex index to its best week since January. A gauge of currencies was set for its first weekly increase in May as the won paced Asian gains. The ruble weakened Friday as oil trimmed its third weekly climb.

Developing-nation assets are rebounding from a string of weekly losses on optimism global markets can endure higher US interest rates. Fed Chair Janet Yellen speaks at Harvard University Friday and may offer clues on the rate timing. Several of her colleagues have signaled their willingness to tighten policy as soon as next month in recent days. Odds of the Fed raising borrowing costs in June have pulled back to 28%, Fed funds futures show.

“Markets will listen to what Yellen will say today as her statement could provide clues of what is to come,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. “It’s be better to sell into the rally and capitalize on gains because June will still be volatile.”

Jeffrey Gundlach, chief executive of DoubleLine Capital LP in Los Angeles, said he expects Yellen will “be dovish” in her speech and expects the Fed will refrain from raising interest rates in June unless traders in the futures market assign odds of at least 50% to the move.

The MSCI Emerging Markets Index rose 0.8% to 809.03 at 9:04am in London, its third day of gains. The measure has climbed 3% since May 20, poised to end five weeks off declines, the longest losing streak since August. Financial markets in the US and the UK will be closed Monday for holidays.

Stock Valuations

The developing-markets stocks gauge trades at 11.5 times the projected 12-month earnings of its members, compared with a multiple of 16 for the the MSCI World Index of developed-nation stocks, according to data compiled by Bloomberg.

All 10 industry groups in the developing-markets stock index rose this week, paced by technology companies. Advanced Semiconductor jumped 10% Friday after agreeing to merge with Siliconware Precision Industries Co through a new holding company structure. Taiwan’s Taiex climbed 0.8%, bringing gains this week to 4.1%.

India’s S&P BSE Sensex index rose 0.9% Friday and is up 5.1% from May 20. State-owned Bharat Petroleum Corp jumped the most in more than two months after its fourth-quarter profit exceeded estimates. Larsen & Toubro Ltd is the best performer this week after the engineering company posted better-than-expected earnings and forecast sales to rise this year.

Hong Kong’s Hang Seng China Enterprises Index climbed 0.8%, paced by gains in banks, helping to extending the gauge’s advance this week to 3.5%. The Shanghai Composite Index capped a sixth week of declines, the longest losing streak since July 2012, amid concern a pick-up in earnings growth is losing steam as the nation’s economy decelerates. Data on Friday showed industrial companies’ profit growth slowed to 4.2% in April.

Currencies

The MSCI Emerging Markets Currency Index has risen 0.3% this week. The won had its first weekly advance in a month as a rebound in oil bolstered appetite for emerging-market assets and investors priced in higher US interest rates.

The chance Bank of Korea will cut borrowing costs again are diminishing on the prospect of tighter US monetary policy and after data suggested the Asian nation’s exports are reviving, according to Daewoo Securities.

Exchange rates in Taiwan, India, Indonesia, the Philippines and the Thai baht all posted weekly advances.

“Asian currencies reflected the optimism in the broader markets earlier this week that the global economy will be able to withstand a Fed rate hike in summer.” said Nizam Idris, head of foreign-exchange and fixed-income strategy at Macquarie Bank Ltd. “Firm commodity prices led by oil helped.”
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