New York: Emerging-market stocks rose for a fourth day at the end of last week, completing the biggest two-year gain since 1989, as confidence in the global economic recovery increased and higher metals prices boosted raw-materials producers.
The MSCI Emerging Markets Index advanced 0.5 per cent to 1,151.38 in New York, extending last year's gain to 16 per cent. The 21-country gauge has surged 103 per cent since the end of 2008 as developing nations led the global economy's recovery from its first recession since the Second World War.
"Investors are again more focused on the higher economic and earnings growth potential in developing economies," Chris Weafer, chief strategist at Moscow-based UralSib Financial Corp, said in an e-mailed note.
China's Shanghai Composite Index advanced 1.8 per cent, paring last year's 14 per cent loss and leading Asian shares higher after better-than-forecast data on US initial jobless claims, business expansion and pending home sales. The Hungarian forint and Czech koruna led gains among developing-nation currencies, strengthening more than one per cent.
The extra yield investors demand to own emerging-market bonds over US Treasuries rose four basis points, or 0.04 percentage point, to 2.44 percentage points, according to JPMorgan's EMBI+ Index. The so-called yield spread narrowed 30 basis points last year. The gauge's 41 per cent return since the end of 2008 is the biggest since 2004.
Investors poured record amounts of money into emerging-market equity and bond mutual funds last year as developing countries expanded at a 7.1 per cent rate, compared with 2.7 per cent in advanced countries, according to International Monetary Fund estimates.
The MSCI emerging-market index outperformed the MSCI World Index by 6.8 percentage points last year.
Bonds of developing-nation governments denominated in dollars returned 12 per cent, compared with a 5.9 per cent gain from US Treasuries, according to indexes compiled by JPMorgan Chase & Co and Merrill Lynch.
The MSCI gauge will climb to 1,463 this year, or 27 per cent above the Dec-ember 31 level, according to the average of five predictions by emerging-market equity strategists compiled by Bloomberg. The index trades for 14.5 times reported earnings, compared with an average of 16.8 times since March 1995, data compiled by Bloomberg show.
Profits will climb 25 per cent in the next 12 months, compared with 26 per cent earnings growth for the MSCI World, according to analysts' estimates compiled by Bloomberg.
Benchmark equity indexes in Taiwan, India and Vietnam advanced at least 0.6 per cent after a report showed applications for unemployment assistance in the world's largest economy decreased by 34,000 to 388,000 in the week ended December 25, breaking the 400,000 level for the first time since July 2008.
Other data showed businesses expanded last month at the fastest pace in two decades and pending home sales climbed in November for the fourth time in five months.
China's Jiangxi Copper Co and Yunnan Copper Industry Co jumped more than seven per cent after copper prices advanced to a record on heightened speculation that a supply shortage will worsen. The Shanghai Composite gauge's retreat last year was the biggest drop among equity indexes in the 10 biggest markets in the world.
India's Bombay Stock Exchange Sensitive Index climbed 0.6 per cent Friday, extending its 2010 gain to 17 per cent, the top performance among major equity markets.
Foreign investors bought a net Rs6.05 billion (Dh495.4 million) of Indian equities on December 29, boosting last year's inflows to a record Rs1.31 trillion, according to the Securities and Exchange Board of India.
Peru's main stock index rose for a sixth day, gaining 0.5 per cent to a three-year high, led by Rio Alto Mining Ltd and Candente Copper Corp.
Mexico's IPC index rose for a fifth day, increasing 0.8 per cent to a record, extending its gain last year to 20 per cent.
Mexico's peso strengthened 0.5 per cent to 12.34 per US dollar, extending its climb last year to 6.1 per cent, the steepest gain on record.
Stock exchanges in South Korea, Indonesia, the Philippines, Malaysia, Thailand, Russia, the Czech Republic and Brazil were all closed for the New Year holidays.