EMERGING MARKETS-Stability hopes push up Cairo stock market
LONDON Aug 28 (Reuters) - Emerging equities slipped to three-week lows on Tuesday, pressured by global growth worries and uncertainly over central bank action, but in Egypt hopes for political stability boosted the Cairo stock index to the highest in 5-1/2 weeks.
MSCI's emerging equity index eased 0.2 percent after losing 0.5 percent on Monday when London was shut.
Chinese shares which comprise a fifth of the index rebounded almost 1 percent off 3-1/2 year lows hit on Monday after Premier Wen Jiabao pledged steps to stabilise exports but did not mention "formal" policy easing..
This was seen by some as diminishing the chances of Beijing cutting bank reserve requirements or interest rates.
Markets are also on edge ahead of Friday's speech by the U.S. Federal Reserve's Ben Bernanke who could offer clues as to when the next round of Fed money printing may start.
Egyptian shares bucked the weaker trend after an anti-government rally failed to muster support and hopes built of aid from the International Monetary Fund. President Mohamed Mursi also told Reuters there were no plans to devalue the pound.
"One catalyst is the suggestion of a bit more political stability as the generals have retired, and the second is the new flow of Middle East money which helps the balance of payments and that's bringing more positive sentiment towards Egyptian equities," Citi strategist Luis Costa said.
Egypt's benchmark 2020 dollar bond rose to new Sept. 2011 highs, with the yield down 100 basis points since Aug 1. Egyptian 5-year CDS fell 15 bps to 485 bps, Markit said.
In Hungary, the forint was flat against the euro ahead of a central bank meeting that carries a small chance of a rate cut. Hungarian short-end bonds have rallied about 40 basis points in August, helped by expectations of looming rate cuts.
"At this point, I wouldn't pay the front-end (of bond and swap curves)," Costa said. "I think the central bank is gearing for a cut, whether today or at the Sept meeting."
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