Emerging-market stock valuations jump to highest level in 4 years

Equity valuations in emerging markets rose to a four-year high as optimism that the US will step up investments in India boosted Mumbai-listed shares to a record. The rouble strengthened and Russian shares pared losses.

A gauge of developing-nation stocks traded at 11.6 times the projected earnings of its members, still almost a fourth cheaper than developed markets. ICICI Bank Ltd climbed to an all-time high, helping the S&P BSE Sensex rise for an eighth day. The rouble gained 1.7 per cent and the dollar-denominated RTS Index pared a loss of as much as 4.9 per cent as investors bet that the Standard & Poor's downgrade of Russia to junk is already reflected in the prices.

"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 MSCI Emerging Markets Index added less than 0.1 per cent to 988.95 at 12:03 pm in London. The measure is heading for the best start to a year since 2012 as central banks in India to Turkey cut interest rates and the European Central Bank unveiled a ^1.1 trillion ($1.25 billion) plan to support economic recovery in the euro area.