Emerging-markets comeback gets fresh boost from India
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U.S. investors who’ve kept faith with emerging markets have been well-rewarded this year. They’re getting another big payday today, after India’s stock markets soared on news that the country’s ruling party won a sweeping election victory over the weekend.
The Sensex stock index in Mumbai rocketed 2,110 points, or 17.3%, to 14,284 on expectations that Prime Minister Manmohan Singh’s Congress Party will continue reforms aimed at speeding India’s economic growth.
The iShares MSCI Emerging Markets fund, an exchange-traded fund popular with U.S. investors, was up $1.41, or 4.7%, to $31.49 at about 9:50 a.m. PDT today, extending its year-to-date gain to 26%.
From Bloomberg News:
The ruling Congress party won the most seats since 1991, when then-finance minister Singh abandoned Soviet-style state planning and introduced free-market reforms that have helped India’s economy quadruple in size. With almost twice as many seats as the main opposition, Singh, 76, may further reduce barriers to foreign investment in insurers and retailers, plans that had been frustrated by communist lawmakers. Kamal Nath, trade minister in the outgoing administration, said in an interview the government ‘should aim’ to boost growth to 8% in the business year that started April 1. The $1.2-trillion economy is expected by the central bank to expand 6%, compared with average growth of 8.6% in the previous five years. ‘The election result is extremely positive and very, very bullish,’ Madhusudan Kela, head of equities at Mumbai-based Reliance Capital Asset Management, the nation’s largest money manager overseeing $18 billion of assets, said in an interview. ‘This will provide a government which is stable and has powers to take decisions.’
Monday’s surge left the Sensex index up 48% this year, while the U.S. Standard & Poor’s 500 index still is slightly in the red.
Emerging markets crumbled last year amid the global financial crisis. The Sensex plunged 52% in 2008 after six straight annual gains. But since U.S. stocks turned up beginning March 10, money has poured back into many emerging markets as well in search of growth ideas.
The big four ‘BRIC’ countries -- Brazil, Russia, India and China -- have led the way. Year to date, Brazil’s Bovespa index has rallied almost 35%, Russia’s Micex index has jumped 63% and China’s Shanghai market index is up 46%.
Among funds that focus on the BRIC markets, the iShares MSCI BRIC fund is up $2.02, or 6.4%, to $33.76 today, and the SPDR S&P BRIC 40 fund is up 77 cents or 4.2%, to $19.15.
-- Tom Petruno