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Emerging-Market Stocks Rise, Poised for Best Month Since 1989
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By Michael Patterson and Laura Cochrane

March 25 (Bloomberg) -- Emerging-market stocks rose, with the global benchmark index poised for the biggest monthly gain since 1989, after the International Monetary Fund said it will double credit limits and relax loan conditions for developing nations. Bonds rallied for a third day.

Shares in eastern Europe, the region hardest hit by the freeze in global credit markets, led the advance as the IMF said it will let governments borrow more money up front. Hungary’s BUX Index climbed 3.4 percent for the top increase among emerging markets worldwide, while Poland’s WIG20 index added 1 percent. India stocks led gains in Asia as Reliance Industries Ltd., the nation’s most valuable company, added 5.5 percent.

The MSCI Emerging Markets Index climbed 0.3 percent to 583.04 at 12:38 p.m. in London, bringing its gain this month to 17 percent. The extra yield investors demand to own developing nations’ bonds instead of U.S. Treasuries fell nine basis points today to 6.22 percentage points, the lowest since Nov. 10, according to JPMorgan Chase & Co.’s EMBI+ Index.

The IMF program “is the right thing to do,” said Viktor Broczko, a London-based emerging-market equities manager at Progressive Developing Markets, which oversees about $400 million. “If a country was left to go bust, we cannot envisage what the consequences would be or what would happen to the market after that.”

Emerging-market stocks and bonds climbed this month on speculation government efforts from Washington to Shanghai aimed at unlocking credit markets and reviving economic growth will succeed. The U.S. Federal Reserve said this month it will begin buying debt to reduce borrowing costs, while the Treasury unveiled a $1 trillion plan to purchase toxic assets from banks. China said its economy will rebound as a 4 trillion yuan ($585 billion) stimulus package takes effect.

Market Swings

The MSCI index has jumped 23 percent since March 2, marking its fifth swing of at least 20 percent since the gauge fell to a four-year low on Oct. 27. That’s the most in any five-month period since the measure’s inception in 1987, according to data compiled by Birinyi Associates Inc. The index is up 2.8 percent this year, compared with an 11 percent decline in the MSCI World Index of developed-nation shares.

“People are realizing that actually emerging markets have far better fundamentals than developed markets,” Broczko said.

OTP Bank Nyrt., Hungary’s largest lender, added 2.3 percent in Budapest trading, while Foldhitel es Jelzalogbank Nyrt., the nation’s second-biggest mortgage lender, climbed 5.2 percent.

The IMF, in a statement released in Washington late yesterday, said it will loosen the strings attached to loans, overhaul a credit program for immediate borrowing, double regular credit lines and let governments borrow more money up front.

‘Significant Change’

“These reforms represent a significant change in the way the fund can help its member countries, which is especially needed at this time of global crisis,” IMF Managing Director Dominique Strauss-Kahn said in the statement.

Separately, Romania got a 20 billion-euro ($27 billion) loan from the IMF, European Union and other lenders, the sixth eastern European nation to be bailed out since the global financial crisis began. Romania’s credit risk dropped to the lowest in 4 1/2 months and its currency strengthened as much as 0.4 percent to 4.2780 per euro.

Russia stocks rallied as investors speculated a 4 percent slump in the Micex index yesterday, spurred by concern a court ruling against Telenor ASA and a government probe of OAO GMK Norilsk Nickel are increasing investment risk, was overdone.

Yesterday’s drop was a “false move down,” said Constantin Demchenko, head of trading at Everest Asset Management in Moscow.

Gazprom, Reliance

OAO Gazprom, the world’s biggest natural-gas producer, rebounded 2.3 percent after falling 2.7 percent yesterday. OAO Sberbank, Russia’s biggest lender, added 4.8 percent. The Micex rose 2.6 percent, bringing its March advance to 26 percent.

India’s S&P CNX Nifty Index climbed 1.6 percent to the highest level since Jan. 6, while the Bombay Stock Exchange Sensitive Index added 2.1 percent.

Reliance and Infosys, India’s second-largest software services provider, rose on speculation they will benefit from an increased weighting in the Nifty index using a new computation method based on free float, or the number of shares available for trading.

China’s stocks fell, snapping a seven-day rally, as a measure of shipping costs for commodities extended its longest losing stretch since December and Bank of China Ltd. reported its weakest earnings growth in three years. The country’s third- largest lender dropped 2.3 percent in Shanghai trading.

Shares in western Europe declined for the first time in five days as German business confidence slid to the lowest level in 26 years. Japan’s Nikkei-225 Stock Average slipped 0.1 percent.

To contact the reporters on this story: Michael Patterson in London at [e-mail]; Laura Cochrane in London at [e-mail]

Last Updated: March 25, 2009 08:57 EDT