Emerging-Market Assets Rally as Traders Focus on U.S. Election
Emerging-Market Assets Rally as Traders Focus on U.S. Election
(Bloomberg) -- Emerging-market stocks gained the most in three weeks and Mexico’s peso led currencies higher as traders weighed the odds of a victory for Hillary Clinton in Tuesday’s U.S. presidential election.
Developing-nation investors perceive a Clinton win as positive after Republican candidate Donald Trump put forward anti-trade pledges that may affect ties with Mexico and China. The peso, which headed for its biggest one-day gain against the dollar since September, has been considered a barometer for investors’ views on Trump’s chances in the election. A final Bloomberg poll released Monday pointed to a slim lead for Clinton, while the Federal Bureau of Investigation a day earlier reaffirmed that Clinton’s use of private e-mail servers wasn’t a crime.
The MSCI Emerging Markets Index jumped 1.7 percent to 894.77 as of 11:14 a.m. in New York. Nine of the benchmark gauge’s 11 industry groups advanced, with consumer-discretionary, energy and raw-material stocks all rising at least 1.9 percent. A gauge of developing-nation exchange rates rose to the highest level this month.
“The main driver is the drop of the Clinton case,” said Regis Chatellier, a London-based strategist at Societe Generale SA, who favors sovereign international bonds from Mexico, Croatia and Turkey. “The market is pricing a higher chance for a Clinton victory.”
Voter sampling putting Clinton ahead in the election contest followed news that the FBI is sticking to its July conclusion of Clinton’s handling of her e-mails as secretary of state. The bureau’s director James Comey informed Congress just more than a week ago that the FBI was looking at fresh e-mails potentially related to Clinton, a statement that roiled the presidential race and breathed new life into Trump’s candidacy at a time most polls showed Clinton with a wide lead.
Developing-nation stocks fell 2.8 percent last week after the FBI announced its new investigation, while actively managed emerging-market equity funds lost a net $327 million in the week ending Nov. 2, their first outflow in 19 weeks, EPFR Global data show. Traders pulled $605 million out of the MSCI Emerging Markets ETF, the biggest exchange-traded fund tracking the MSCI equity benchmark.
The Ibovespa jumped 3.4 percent Monday, ending a three-day decline in Sao Paulo. Commodity producers including Petroleo Brasileiro SA and Vale SA were among the biggest contributors to the advance. The Bloomberg Commodity Index added 0.3 percent, rising for the first time in seven days.
The BUX Index in Budapest rose 1.1 percent after Moody’s became the third main ratings company to give the former communist nation investment-grade status. Samsung Electronics Co. helped push South Korea’s Kospi Index up 0.8 percent. Indian shares rebounded 0.7 percent, halting a five-day drop.
Egypt’s EGX 30 Index gained 5.4 percent to the highest since February 2015. Stocks in the Arab nation have rallied amid bets a decision to float its currency will help cement a $12 billion loan from the International Monetary Fund.
The Egyptian pound has lost nearly 50 percent of its value since it was floated on Nov. 3. Egyptian banks began freely trading foreign exchange on the interbank market this week for the first time. The pound weakened 3.6 percent on Monday to 16.75 per dollar at the National Bank of Egypt, the country’s largest lender.
The Mexican peso strengthened 2.3 percent. Brazil’s real gained 1.3 percent. The South African rand rise 1.6 percent. China’s yuan fell 0.3 percent after the central bank weakened its reference rate.
The MSCI Emerging Markets Currency Index added 0.3 percent, heading for the highest close since the end of October. The premium investors demand to own emerging-market sovereign bonds over Treasuries narrowed seven basis points to 343, according to JPMorgan Chase & Co. indexes.
South Korea’s bonds retreated, with the yield on 10-year notes rising two basis points to 1.74 percent. Government debt fell ahead of a review Friday where the central bank is forecast to keep interest rates unchanged.
--With assistance from Jung Park Ian Sayson and Liau Y-Sing To contact the reporters on this story: Narayanan Somasundaram in Sydney at nsomasundara@bloomberg.net, Maria Levitov in London at mlevitov@bloomberg.net. To contact the editors responsible for this story: Daliah Merzaban at dmerzaban@bloomberg.net, Douglas Lytle, Richard Richtmyer