(Bloomberg) -- Emerging-market stocks rose as bets that improving growth prospects will bring greater gains for companies from consumer-goods makers to banks outweighed concern that global central banks may reduce stimulus that has supported demand for riskier assets.
OTP Bank Nyrt., Hungary's largest lender, lifted the BUX Index to a four-week high, while Samsung Electronics jumped after announcing plans to sell shares in drugmaker Samsung Biologics Co. Indian equities rose for a third day as the central bank cut interest rates Tuesday. A gauge of developing-nation currencies fell as data showing expansion in U.S. manufacturing and hawkish comments from Federal Reserve officials strengthened the case for a U.S. interest-rate increase this year.
“The move has support from cyclicals,” said Larry Hatheway, the chief economist at GAM Holding AG in London, referring to stocks that rise when expectations for growth increase. “It represents some of the rotation away from what has worked earlier this year in emerging markets.”
Analysts increased their profit projections for companies in the MSCI Emerging Markets Index by the most since 2011 in the third quarter, according to earnings estimates compiled by Bloomberg. Commodity producers and energy stocks have led a 15 percent rally in the benchmark gauge this year, sending valuations to 12.5 times estimated 12-month earnings. This compares with a multiple of 16 for the developed-market benchmark, which has added 3.3 percent in 2016.
While the Fed's demonstrated commitment to a slow pace of rate increases boosted appetite for riskier assets, bets on the probability of a U.S. rate move in December have increased to 61 percent, compared with 37 percent two months ago. Developed-nation stocks fell Tuesday after Bloomberg News reported that the European Central Bank will probably reduce bond purchases gradually as it ends quantitative easing.
The MSCI Emerging Markets Index increased 0.4 percent to 915.61. Financial and consumer-discretionary stocks rose the most. Samsung Electronics, the biggest contributor to the benchmark's advance, added 1 percent. The maker of Galaxy mobile phones plans to sell 5.5 million shares in Samsung Biologics Co. in an initial public offering in South Korea.
Hungary, Poland
OTP Bank rose 3.2 percent after JPMorgan Chase & Co. upgraded the price target for the stock by 31 percent on profit outlook and added OTP to a list of preferred shares. The Hungarian benchmark gauge added 2 percent.
Naspers Ltd. advanced in South Africa after two days of losses. LPP SA, Poland's largest clothing retailer, posted a record two-day gain, surging 27 percent after saying sales advanced 20 percent from a year earlier.
PZU SA, Poland's largest insurer, rose the most since 2010 in Warsaw, rallying 7.1 percent after Chief Executive Officer Michal Krupinski said the company may pay a dividend at the higher end of its range despite its acquisition plans.
The S&P BSE Sensex Index added 0.3 percent, extending Monday's 1.4 percent gain, after the Reserve Bank of India's monetary policy committee unanimously voted to lower interest rates. The benchmark was cut to 6.25 percent from 6.50 percent, the lowest since January 2011.
China Evergrande Group climbed 8.2 percent in Hong Kong, its steepest advance in a year, after the developer announced a plan to inject assets into a property company listed on the Chinese mainland, taking advantage of higher valuations there. Markets in mainland China are closed all week for holidays.
Currencies, Bonds
The MSCI Emerging Markets Currency Index slipped 0.1 percent. Colombia's peso dropped 1.6 percent as the International Monetary Fund cut its growth outlook for the country a day after voters rejected the government's peace deal with Marxist rebels.
The Turkish lira lost 1.3 percent. Brazil's real weakened 1.5 percent. India's rupee rose 0.2 percent, holding on to its gains for a third day.
The premium investors demand to own emerging-market debt over U.S. Treasuries narrowed five basis points to 328, according to JPMorgan indexes.
Yields on South Korea's 10-year government bonds rose four basis points to 1.47 percent from the lowest level since late August. A report Tuesday showed the country's current-account surplus narrowed to $5.51 billion in August, the smallest since April, from a revised $8.67 billion the previous month.
--With assistance from Liau Y-Sing and Ian Sayson To contact the reporter on this story: Maria Levitov in London at mlevitov@bloomberg.net. To contact the editors responsible for this story: Daliah Merzaban at dmerzaban@bloomberg.net, Srinivasan Sivabalan, Richard Richtmyer
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