London: Emerging market stocks rallied for a third day, led by Qatar, as concern diminished that Dubai will default. The yen weakened on speculation Japan will act to curb its gains and the dollar fell, driving gold to a record.
The MSCI Emerging Markets Index rose 0.7% at 12.13pm in London, heading for its longest winning streak in three weeks. Qatar’s DSM 20 Index jumped 5.3%. The yen declined against all 16 most-traded currencies, while the dollar weakened versus 11 and gold touched $1,217.23 (Rs56,357) an ounce in London. Futures on the Standard & Poor’s 500 Index were little changed.
Mark Mobius, who oversees more than $30 billion as chairman of Templeton Asset Management Ltd, said in a Bloomberg Television interview in Hong Kong that Dubai will be bailed out by its neighbours. Prince Alwaleed bin Talal, the billionaire Saudi investor, said Middle East economies won’t be shaken by the crisis. Dubai’s debt rescheduling will have only a minor effect on the euro region’s economy, Luxembourg’s Jean-Claude Juncker said on Tuesday after leading a meeting of European finance ministers in Brussels.
“We’ve got more to go for the rally in emerging markets, said Mobius,” who favours United Arab Emirates developers including Emaar Properties Pjsc that tumbled more than 10% this week. “We’re going to see a very fast recovery, and the results of companies’ earnings are going to surprise on the upside.”
Benchmark equity indexes in China, Egypt and Turkey climbed more than 1%, while the extra yield investors demand to own emerging market bonds over US treasuries fell for a second day. The Philippine peso and South Korea’s won strengthened at least 0.6% against the dollar to lead gains among developing nation currencies.
Dubai World, the state-controlled investment company, is in talks with its lenders to restructure $26 billion of debt, easing concern that a default would add to the $1.7 trillion financial companies around the world have written down as the credit crisis impaired the value of their assets.
The cost of protecting Dubai’s government debt from default was little changed on Wednesday, after tumbling 30% since 27 November, according to CMA DataVision prices. Credit default swaps on the nation fell 9 basis points to 451, while contracts on Saudi Arabia were down 4 basis points at 93 and Abu Dhabi declined 2.5 to 126.
The yen lost 0.6% against the euro and 0.7% versus the dollar after Japanese Prime Minister Yukio Hatoyama was cited by the Nikkei newspaper as saying the currency’s strength can’t be left as it is. Chief cabinet secretary Hirofumi Hirano said later Hatoyama wasn’t suggesting the government is ready to intervene. The yen has strengthened 4.1% versus the US currency this year and traded at a 14-year high of 84.83 per dollar on 27 November.
Japan should call for international intervention to stem the yen’s advance, financial services minister Shizuka Kamei said in an interview in Tokyo on Wednesday.
Gold for immediate delivery rose as much as 1.7% in London, extending its annual jump to 38%. Silver, platinum and palladium also gained.
Among industrial metals, aluminium for delivery in three months advanced 0.9% to $2,121 a metric tonne on the London Metal Exchange. Crude oil for January delivery fell 0.8% to $77.71 a barrel in New York.
The MSCI World Index of 23 developed nations’ stocks was little changed.