Most emerging market stocks rose after their worst week in at least a decade as world leaders pledged unprecedented support to help financial institutions weather the banking crisis. Bonds declined.
The MSCI Emerging Markets Index is heading for its biggest jump in almost a month, gaining 3.7 per cent to 613.81 at 1:36 pm in London. The measure lost a record 20 per cent last week.
The extra yield investors demand to own developing nations’ bonds instead of US Treasuries rose 78 basis points to 6.49 percentage points, the highest spread since April 2003, according to JPMorgan Chase & Co’s EMBI+ index.
“Global investor risk sentiment has improved,’’ Neil Shearing, an emerging markets economist at Capital Economics in London, said in a phone interview. “There seems to be some kind of hope that a complete financial meltdown has been avoided.’’
The Federal Reserve, European Central Bank and the Bank of England will offer financial institutions unlimited dollar funds for the first time in an attempt to break the squeeze in money markets.
European leaders agreed this weekend to guarantee new bank refinancing and use government money to prevent lenders collapsing.
Markets in Asia led the advance. China’s CSI 300 Index climbed 4.1 per cent to 1,985.49, the first gain for the country’s benchmark index in six days. South Korea’s Kospi Index rose 3.8 per cent to 1,288.53, the index’s biggest increase since September 19.
Russia declines
India’s Sensex Index jumped 7.6 per cent, its biggest one-day surge in more than four years, after ICICI Bank Chief Executive Officer K V Kamath said the Mumbai-based lender has sufficient funds. ICICI Bank, which has suffered the biggest losses on overseas investments among Indian banks, climbed 17 per cent, a record, to Rs 425.15.
Indexes in Europe also gained, with the exception of Russia. The nation’s Micex Index dropped 3.4 per cent to 676.78.
The measure was halted for an hour at 3:08 pm local time after a technical index declined more than 5 per cent, Interfax reported. The dollar-denominated RTS Index slid 6.6 per cent to 789.4. Trading in both indexes was suspended on October 10.
“The movements in Russian stocks still seem to be driven by fear and panic,’’ Shearing said. “They can’t keep halting trading because once it’s ingrained in investors’ minds that they will halt once it starts to fall it just exacerbates the problem as they try to get rid of assets.’’
Gulf shares advance
Poland’s WIG20 Index gained 0.8 per cent to 2,007.23 in Warsaw. Romania’s Bucharest Trading Index added 5.5 per cent to 3,363.79. The Czech Republic’s benchmark PX Index advanced 7.3 per cent to 952.90.
Persian Gulf shares rose, driving benchmark indexes in Dubai and Abu Dhabi to their biggest gains in at least four years, as the United Arab Emirates said it will guarantee bank deposits.
The Dubai Financial Market General Index jumped 11 per cent to 3,343.56, its biggest one-day surge since Bloomberg began tracking the index in December 2003. The measure has still declined 19 per cent this month.
The Abu Dhabi Securities Exchange General Index soared 6.9 per cent, the largest gain since at least September 2001, according to data compiled by Bloomberg.
The UAE will guarantee the deposits of local and foreign banks operating in the country for three years, the state news agency reported today.
