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Emerging Stocks Gain on Greek Vote, Outlook for China Stimulus
Perspective | 17 February 2012

Emerging-market stocks rebounded on 13 February from the biggest drop in more than two months after Greek lawmakers approved austerity plans and China’s premier said the nation needs to “fine-tune” economic policies, adding to speculation the government will take more steps to boost demand.

The MSCI Emerging Markets Index added 1 percent to 1,053 at the close in New York, following a 1.8 percent slide on 10 February. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong climbed 0.5 percent. Brazil’s Bovespa stock index surged 2.6 percent as higher commodities prices lifted producers. The Micex Index jumped 2.3 percent in Moscow, the most since 3 January. Turkish stocks gained 2.1 percent.

Greek Prime Minister Lucas Papademos won parliamentary approval for austerity measures to secure an international bailout as rioters protesting the measures battled police and set fire to buildings in downtown Athens. China’s economic circumstances in January and the first quarter deserve attention, Premier Wen Jiabao told business executives in Beijing, the official Xinhua News Agency reported on 12 February.

“It’s nice to get the Greek vote behind us, but certainly it would be great to get the whole European sovereign mess behind us and I don’t think we’re there yet,” Greg Lesko, who manages $700 million at Deltec Asset Management in New York, said by phone. “Certainly with Europe slowing down, that’s going to have an important influence on Chinese exports. They’ll do something to stimulate demand.”

Emerging-market stocks have gained 15 percent this year, beating the 8.2 percent increase for developed-nation shares. Developing-country stocks trade for 10.5 times estimated earnings, compared with the 12.6 times multiple in developed markets.

China Lending
Wen’s remarks were released after China’s new lending missed estimates by 26 percent in January and money supply grew the least in more than a decade, according to data released by the central bank on 10 February after the market closed.

While Wen “did not specify what types of policy adjustments were being contemplated, it would be remarkable if lower bank reserve requirements were not one of them,” Michael Derks, chief strategist at FXPro Financial Services in London, wrote in an e-mail.

China Construction Bank Corporation led Chinese stocks in Hong Kong higher, gaining 1.3 percent.

Sales at US retailers probably increased in January by the most in four months, economists said before a Commerce Department report due on 14 February.

The Bovespa gained in Sao Paulo as higher commodity prices lifted Petroleo Brasileiro SA and Vale SA. Petrobras, as Petroleo Brasileiro is known, rose 3.7 percent. Vale added 2.6 percent.

Sberbank, Gazprom
The Standard & Poor’s GSCI index of 24 raw materials gained 1 percent.
OAO Sberbank, Russia’s biggest lender, added 2.3 percent and OAO Gazprom, the world’s largest natural-gas producer, gained 2.2 percent in Moscow.

In Asian markets, Taiwan’s Taiex Index and South Korea’s Kospi index climbed 0.6 percent.

The extra yield investors demand to own emerging-market debt over US Treasuries fell 9 basis points, or 0.09 percentage point, to 379, according to JPMorgan Chase’s EMBI Global Index.

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