Emerging-market stocks gained, pushing valuations to a four-year high, as speculation that the U.S. will step up investments in India boosted Mumbai-listed shares to a record. Russia’s ruble rose from an all-time low.
The Micex Index advanced 1.9 percent and the ruble ended a two-day decline as investors bet the Standard & Poor’s downgrade of Russia’s credit rating is already reflected in securities prices. The Tadawul All Share Index increased for a second trading day after Saudi King Abdullah’s death. Most Brazilian stocks fell on speculation President Dilma Rousseff will undo austerity measures enacted to win investor confidence.
The MSCI Emerging Markets Index increased 0.1 percent to 989.83. Its member stocks sell for an average 11.6 times projected 12-month earnings, the most since January 2011. The gauge’s 50-day historical volatility, a measure of price swings during the period, has risen to 14 percent, the highest level since October 2013, as oil prices slumped and developing-nation currencies weakened.
“Emerging-market valuation is not an issue as long as we see some improvement in profitability,” Martial Godet, the head of emerging-market equity and derivatives strategy at BNP Paribas SA in Paris, wrote in an e-mail. “The decline in oil prices and EM currencies is a game changer and can trigger a turnaround in profitability.”
The S&P BSE Sensex Index climbed 1 percent in Mumbai, for the longest rally since Sept. 3. During his visit to India, President Barack Obama announced measures to generate $4 billion of trade and investment and said there would be more if the Asian country removed barriers to business. The two sides also concluded an agreement for nuclear-energy projects and pledged greater defense and economic cooperation.
ICICI Bank Ltd. gained 3.6 percent, rising for an eighth day. Larsen & Toubro Ltd. jumped to its highest price since July after saying the nuclear deal opens up “large potential” for the engineering company.
The Micex Index advanced to the highest level since August 2011. S&P downgraded the sovereign one step to BB+, the same level as Bulgaria and Indonesia, and said the outlook for Russia remains negative. The ruble rebounded to 66.82 per dollar.
“There was nothing surprising about the downgrade,” Stanislav Kopylov, who helps manage 45 billion rubles ($665 million) at UralSib Asset Management in Moscow, said by phone. “The Micex feels good because of the huge share of exporters in the index which benefit from the ruble weakness. I would highlight metals-and-mining stocks and fertilizers.”
Russia said it will proceed with its second bond auction this year, reintroducing floating-rate notes.
The MSCI developing-nation stock gauge has gained 3.5 percent in 2015 as central banks in India to Turkey cut interest rates and the European Central Bank unveiled a 1.1 trillion-euro ($1.25 billion) plan to support economic recovery in the euro area.
The Tadawul All Share Index gained 2.4 percent. Saudi Arabia’s market regulator said it’s on track to open the Arab world’s biggest stock market to foreigners in the first half of the year, confirming that there has been no change of policy since a new monarch ascended to the throne.
PetroChina Co. followed Hong Kong-traded mainland shares lower, while the Shanghai Composite Index retreated from a five-year high. Data today showed Chinese industrial profits slid 8 percent in December from a year earlier, the most since at least October 2011.
Taiwan Semiconductor, the world’s largest contract manufacturer of chips, rose to a record. A gauge of technology shares jumped to a six-month high, extending the best performance this year among emerging-market industry groups.