ECB stimulus spurs best week for emerging stocks in 10 months

[LONDON] Stocks from Russia to Taiwan rose, sending an emerging-market gauge to its best week since March, as European Central Bank stimulus boosted appetite for risk. Russian shares climbed with Brent crude after Saudi King Abdullah died.

The dollar-denominated RTS Index rose to the highest level in four weeks as potash producer OAO Uralkali jumped 7 per cent in Moscow. An index of Hong Kong-traded Chinese mainland shares increased to a 3 1/2-year high. Taiwan Semiconductor Manufacturing led gains among technology shares after Goldman Sachs Group Inc. raised its price estimate.

An ECB plan to buy as much as 60 billion euros (US$68 billion) of bonds a month through September 2016 is supporting demand for developing-nation assets. The MSCI Emerging Markets Index increased 0.8 percent to 990.89, pushing the weekly gain to 3.5 per cent. Stocks also climbed after better-than-expected Chinese manufacturing data underscored the success of stimulus measures.

"EM is reacting to the ECB's QE announcement yesterday and also the stabilization in some commodity prices such as oil," Michael Wang, a strategist at Amiya Capital LLP in London, said by e-mail. "There an element of the Saudi succession risk pushing the oil price up today." While markets in the Gulf Cooperation Council were shut for the weekend, Brent crude advanced 0.6 per cent to US$48.79 a barrel after rising as much as 2.6 per cent in London after the Saudi royal court announced King Abdullah's death in a statement. Crown Prince Salman bin Abdulaziz, who succeeded Abdullah on the throne, said he would maintain his predecessor's policies.

The Saudi riyal, which is pegged to the US dollar, touched the lowest level since October 2008. The depreciation may be temporary as the succession plans are expected to be smooth, Bloomberg strategist Mark Cudmore said.

The biggest oil producer in the Organization of Petroleum Exporting Countries led OPEC's decision to maintain its oil- production quota at a meeting in November, worsening a global glut. The gain in Brent supported stocks and currencies in countries that rely heavily on oil and gas industries, including Russia.

The RTS Index advanced 0.4 per cent, bringing the weekly increase to 6.7 per cent. Russia's ruble fell 0.2 per cent to 64.2395 per dollar. The currency erased a gain after Interfax reported that rebels in Ukraine's Donetsk region ruled out talks for a truce. German Chancellor Angela Merkel slammed Russia for undermining neighboring Ukraine's sovereignty and cited "many setbacks" in peace efforts as the death toll in the conflict jumped.

Vale SA, the world's largest iron-ore producer, tumbled 5.3 per cent in Sao Paulo after Goldman Sachs Group Inc. lowered its recommendation on Latin America's mining industry. The Ibovespa slid 1.3 per cent.

Bonds Rally All 24 developing-nation currencies tracked by Bloomberg strengthened against the euro, while five-year government bonds in Russia, Hungary and Poland rallied. The yield on Hungarian 10-year securities fell below 3 percent for the first time.

The yuan weakened 0.3 per cent after China's central bank lowered the currency's reference rate by the most since March. Brazil's real posted its third straight weekly gain, appreciating 1.6 per cent as higher local interest rates made the currency more attractive.

Eight out of 10 industry groups in the MSCI Emerging Markets Index advanced, led by a 1.7 per cent increase in technology shares.

Taiwan Semiconductor climbed 3.6 per cent after Goldman Sachs increased its target price to NT$162 from NT$157. The Taiex Index gained 1.1 per cent to a four-month high.

Hong Kong's Hang Seng China Enterprises Index jumped 1.8 per cent, led by a 2.2 percent increase in China Life Insurance Co. The preliminary Purchasing Managers' Index from HSBC Holdings Plc and Markit Economics was at 49.8 in January, exceeding the median estimate of 49.5 in a Bloomberg survey.

BLOOMBERG