(Bloomberg) -- Emerging-market stocks headed for their best five-day gain since March on speculation investors pulling money from Europe after last month's Brexit vote in the U.K. will buy developing-nation equities.
The MSCI Emerging Markets Index last week erased losses incurred after Britain voted to leave the European Union in a June 23 referendum, and has climbed to its highest level in more than three weeks. Nine of 10 industry groups advanced Monday, with raw-material stocks rallying the most. A gauge of currencies held a four-day advance, while South Korea's won fell on speculation the central bank will intervene to curb its recent gains.
Equity benchmarks rose across Asia amid expectations that central banks in Europe and Asia will add to monetary stimulus to counter any contagion from Brexit, while bets that the Federal Reserve will increase interest rates this year have evaporated. Global funds have poured about $760 million into emerging stocks so far this month as futures traders project the Fed will probably stay on hold though 2017.
‘Begin Accumulating'
“We advise our clients to begin accumulating stocks now as the concern about Brexit has already faded and most investors view its impact on emerging markets will be much less than those in Britain and Europe,” said Jitra Amornthum, the head of research at Finansia Syrus Securities Pcl in Bangkok. “Emerging markets may also begin to attract some funds that will probably continue to move out Europe. And there are expectations of more monetary stimulus from most central banks.”
The MSCI Emerging Markets Index rose 0.5 percent to 843.41, the highest since June 9, as of 12:28 p.m. in Hong Kong. It has climbed 6.1 percent in five days, the most since the period ended March 7, and is up 6.2 percent this year. The gauge trades at 12.1 times the 12-month projected earning of its members, compared with a multiple of 15.8 for the MSCI World Index that is almost flat in 2016.
The Shanghai Composite Index led gains in Asia with a 1.8 percent jump, set for its biggest since May 31, with Industrial & Commercial Bank of China Ltd. and Agricultural Bank of China Ltd. contributing the most to Monday's advance. The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong rose for a third day, climbing 1.3 percent, headed for its highest close since June 10.
India, South Korea
India's benchmark rose 0.7 percent, while equity gauges in Vietnam, the Philippines and Malaysia gained at least 0.5 percent each.
The MSCI Emerging Markets Currency Index was little changed after jumping almost 2 percent in the four days though Friday. India's rupee and the Philippine peso strengthened 0.2 percent each to lead Monday's gains.
South Korea's won retreated 0.1 percent, snapping at four-day rally that was driven by the government's announcement of 20 trillion won ($17 billion) in stimulus.
“I expect Asian currencies to gain in the third quarter,” said Gao Qi, a foreign-exchange strategist at Scotiabank in Singapore. “The market has priced out Fed rate hikes, so generally speaking the Brexit will see capital inflows into Asia. Meanwhile, we have to stay cautious because risk sentiment is still fragile.”
To contact the reporters on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net, Lilian Karunungan in Singapore at lkarunungan@bloomberg.net. To contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net, Amit Prakash, Jonathan Annells
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