EMERGING MARKETS-Stocks slip on US worries despite China gains
LONDON Jan 15 (Reuters) - Emerging equities slipped on Tuesday despite a further surge in Chinese stocks, as a recent run of gains in riskier assets was checked by worries over the debt ceiling debate in the United States.
Investors sought the shelter of U.S. dollar assets after U.S. Federal Reserve Chairman Ben Bernanke warned economic recovery was at risk from the battle to raise borrowing limits.
MSCI's emerging equities index eased 0.4 percent, inching further away from recent nine-month highs.
But Chinese stocks rose 0.6 percent to seven-month highs as markets cheered signs of economic recovery and news Beijing may raise foreign investment quotas.
MSCI's China index, which includes Chinese shares listed in Hong Kong, touched the highest levels since August 2011.
In emerging Europe, Turkish stocks powered to a new record, bringing year-to-date gains to more than 5 percent.
The Hungarian forint rose 0.2 percent, coming off recent seven-month lows. Five-year credit default swaps rose 10 bps to four-week highs, however, Markit said.
Budapest mandated banks on Monday to arrange meetings with investors, which may lead to its first hard currency bond since 2011. An issue would make it easier for Hungary to shun an aid deal with the International Monetary Fund.
The Polish zloty fell 0.3 percent, reacting to continued verbal intervention from policymakers and news the government would carry out conversion of EU funds outside currency markets to avoid strengthening the zloty.
The "zloty is under pressure because German Bunds have come off quite a bit recently and that puts pressure on the back end of the Polish curve, which has lots of foreign participation," said Manik Narain, a strategist at UBS in London.
German and U.S. yields have risen to multi-month highs this year as hopes have grown of a lasting economic recovery.
"There are also lots of long zloty/short forint positions out there which could unwind after a good run, so we may get a few days of correction," Narain added.
The Russian rouble stayed flat to the dollar after the central bank kept interest rates unchanged. Some analysts noted the bank's emphasis on inflationary risks.
"We expect one more 25 bp hike in February. However, monetary tightening is unlikely to be aggressive, as economic slowdown has become evident," BNP Paribas said in a note.
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