| LONDON, March 18
LONDON, March 18 Russia's rouble fell on Tuesday
from the previous session's two-week highs on fears of fresh
economic sanctions and a further military standoff, though
Moscow equities firmed in line with other emerging markets.
Equities were generally stronger across emerging markets,
lifted by big gains in Indian and Korea, while Russian shares
extended the 3.6 percent rise posted on Monday after Western
sanctions were seen as milder than expected.
But Moscow's defiant move towards formally annexing the
Crimea region is keeping alive tensions with the West. President
Vladimir Putin is expected to back absorbing the territory into
Russia when he addresses parliament later in the day.
HSBC strategist Murat Toprak said investors would scan
Putin's speech for clues as to whether military intervention was
likely for the rest of Ukraine. The rouble weakened 0.6 percent
against the dollar.
"The Crimea election is a done deal, the market wants to
know if there is any intention to go beyond Crimea. This is one
of the concerns of the market," Toprak said.
Fears the West will respond with fresh, more stringent
sanctions are reflected in the offshore rouble forwards, which
continue to trade at a rare premium to onshore contracts on
fears that future local settlements could prove difficult.
In neighbouring Ukraine, the hryvnia fell more than 4
percent to the dollar. Investors are waiting to see the
result of an IMF mission to Kiev which concludes on Friday.
Currency flexibility is one of the IMF's demands.
"What happens to hryvnia depends on whether the central bank
is intervening and given the level of their FX reserves I'd
expect that authorities would not stand in the way of the
currency," said RBS analyst Tatiana Orlova.
"On the basis of fundamentals, hryvnia should move to 11 or
12 per dollar."
While broader emerging markets have been boosted by better
economic data from many countries, including the so-called
Fragile Five, gains were seen capped by Chinese developments.
The yuan traded almost at one-year lows to the dollar
after the central bank's weekend move to widen its trading band,
indicating it was willing to tolerate more currency volatility.
Traders expect more weakness as the economy loses steam.
"The China backdrop is not very supportive - all these
uncertainties about potential bankruptcies - this is a market
concern, it's not very positive for emerging markets," Toprak
said, referring to recent corporate difficulties.
Chinese stocks ended flat but MSCI's emerging
markets index rose 0.2 percent, buoyed by gains in
Seoul which posted the biggest one-day rise in two weeks
and in Mumbai where foreign buyers pushed shares to
record highs before elections.
Overseas funds have bought a net $1.6 billion worth of
Indian shares in the past 20 sessions, while Goldman Sachs upped
its recommendation on Indian shares to overweight.
Turkish equities were a quarter point higher but
the lira fell 0.4 percent ahead of a central bank meeting
that is expected to leave interest rates unchanged. The bank
jacked up all its interest rates by 250-500 basis points at the
end of January to protect the lira.
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )