EMs advance to 20-mth high

Developing-nation stocks climbed, sending the benchmark index to a 20-month high, as emerging-market equity funds had the biggest inflows in six months and investors speculated on a bailout to avert a Greek default. The MSCI Emerging Markets index rose 0.7 per cent to 1,044, bringing its gain this week to 1.5 per cent. Currencies strengthened against the dollar, with the Russian ruble gaining the most this year and Turkey’s lira extending its longest rally in three months. The Brazilian real appreciated 1 per cent.

Funds investing in emerging-market stocks attracted $3.27 billion in the week ended April 7, the most since the third week of October, according to EPFR Global. UBS AG economists said that a Greek bailout over the weekend is a “distinct possibility,” while European Central Bank President Jean-Claude Trichet said the country will be able to pay its debt.

“We’ve seen very strong capital inflows into emerging markets,” Mansoor Mohi-uddin, a Singapore-based strategist at UBS, said. Trichet’s prediction that Greece won’t need to default is “absolutely right,” he said. “In the short term, there’s no reason to see that.”

Eastern Europe led the rally in equity markets, with Hungary’s BUX index climbing 2.8 per cent. The Czech PX index rose 1.2 per cent, Poland’s WIG20 gained 1.2 per cent and the Micex index in Russia advanced 1.4 per cent.

‘Orders from everywhere’
A US report showing March sales at chain stores rose the most since 1999 added to signs demand for emerging-market exports is recovering. “The numbers coming out of the US are good and improving, it tells you that the economy has bottomed out,” said Lye Thim Loong, who helps manage $500 million at Avenue Invest Bhd. in Kuala Lumpur. “I’m optimistic on the growth in Asia. Everyone’s getting orders from everywhere,” which will boost earnings, he said. Profit estimates for companies in the MSCI gauge have climbed about 9 per cent this year, according to analysts’ 2010 projections compiled by Bloomberg.

China, India
China’s Shanghai Composite index gained 0.9 per cent amid speculation an appreciating yuan may attract more investment into the country. India’s BSE Sensex climbed 1.36 per cent, its ninth straight weekly gain. The extra yield investors demand to own emerging-market debt over US Treasuries dropped two basis points to 2.41 percentage points, bringing its decline this week to 8 basis points, the sixth straight weekly drop, according to JPMorgan Chase & Co.’s EMBI+ index.

The authors are Bloomberg News columnists. The opinions expressed are their own