CORRECTED (OFFICIAL)-EMERGING MARKETS-Emerging stocks hold at 1-yr highs; currencies strengthen
(Amends paragraph 9 after Markit corrected Turkish CDS price levels)
LONDON, Aug 9 (Reuters) - Emerging market equities touched fresh one-year highs on Tuesday as investors continued their hunt for yield in riskier assets and relatively benign Chinese inflation data allayed fears of deflation in the world's No. 2 economy.
The benchmark emerging equity index rose 0.3 percent after Chinese factory prices fell at their slowest pace in two years, soothing worries about a sharp growth slowdown.
"China is doing fairly well, and that was what we expected," said Jakob Christensen, head of EM research at Danske Bank. "Construction activity in China is fairly good."
At the same time, consumer inflation remained well below China's official target of around 3 percent, keeping the door ajar for further monetary easing and boosting investor sentiment.
"Growth is okay in many emerging markets and inflation pressures are under control - that allows many emerging markets to lower interest rates which is good for stocks and growth," Christensen added.
Chinese mainland stocks rallied 0.7 percent, and some other Asian markets also rose, with South Korean shares up 0.6 percent to touch nine-month highs.
The rally extended into some European markets, with Turkish stocks up 0.7 percent to their highest since mid-July, helped by a thaw in relations with Russia, while Russian dollar-denominated stocks rose 0.3 percent.
Turkish President Tayyip Erdogan is meeting his Russian counterpart Vladimir Putin in St Petersburg on Tuesday for talks intended to end a period of tension after Turkey downed a Russian fighter jet near the Syrian border last November.
The Turkish lira firmed around 0.15 percent against the dollar and Turkish five-year credit default swaps fell one basis point from Monday's close to 246 bps.
In other key emerging markets, the Indian rupee came under pressure, easing as much as 0.2 percent against the dollar after India's outgoing central bank governor Raghuram Rajan kept rates unchanged at 6.5 pct.
This was in line with expectations as inflation has hit a near two-year high.
But other currencies made gains, with the South African rand firming almost 0.4 percent to 10-month highs in the wake of last week's elections, which saw the ruling ANC party suffer its worst result since taking power in 1994.
"South African politics appear to have crossed an important and positive inflection point," analysts at Societe Generale said in a note.
"We remain constructive on (the rand) and expect outperformance ... particularly in light of a global backdrop that continues to be favorable for emerging markets."
In Eastern Europe, the Hungarian forint was the best performer on the day, firming 0.25 percent against the euro in line with a rally in bonds after data showed consumer inflation dropping further into negative territory in July.
Hungarian bond yields slipped 3-4 basis points across the curve, according to dealers in Budapest.
The Croatian kuna remained at a four-week high versus the euro and the Polish zloty hovered near four-month highs.
Earlier in Asia, the Korean won reached a near 14-month high, supported by Standard & Poor's decision on Monday to raise the country's sovereign rating. The Taiwanese dollar also hit its strongest in more than a year.
For GRAPHIC on emerging market FX performance 2016, see http://link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2016, see http://link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2016, see http://link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2016, see http://link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see ) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
on year
Morgan Stanley Emrg Mkt Indx 897.87 +2.34 +0.26 +13.06
Czech Rep 854.22 -8.15 -0.95 -10.68
Poland 1829.67 -7.38 -0.40 -1.59
Hungary 27460.70 +102.84 +0.38 +14.80
Romania 6851.10 +4.56 +0.07 -2.19
Greece 560.85 +0.46 +0.08 -11.17
Russia 957.01 +3.37 +0.35 +26.41
South Africa 45510.65 +124.91 +0.28 -0.63
Turkey 78379.75 +600.65 +0.77 +9.28
China 3025.91 +21.63 +0.72 -14.50
India 28088.18 -94.39 -0.33 +7.55
Currencies Latest Prev Local Local
close currency currency
% change % change
in 2016
Czech Rep 27.00 27.01 +0.03 -0.00
Poland 4.27 4.27 -0.02 -0.19
Hungary 310.42 311.08 +0.21 +1.36
Romania 4.45 4.46 +0.03 +1.45
Serbia 123.19 123.20 +0.01 -1.40
Russia 64.56 64.62 +0.09 +12.99
Kazakhstan 346.46 347.11 +0.19 -1.72
Ukraine 24.81 24.83 +0.08 -3.44
South Africa 13.54 13.58 +0.30 +14.19
Kenya 101.40 101.50 +0.10 +0.79
Israel 3.82 3.82 -0.08 +1.77
Turkey 2.98 2.98 +0.12 -2.07
China 6.66 6.66 -0.02 -2.54
India 66.91 66.80 -0.16 -1.06
Brazil 3.17 3.17 +0.16 +24.94
Mexico 18.53 18.55 +0.12 -7.33
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 372 1 .04 7 60.67 1
(Additional reporting by Sujata Rao; Editing by Gareth Jones)
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