| LONDON, June 17
LONDON, June 17 Emerging market assets were
calmer on Tuesday, as attention shifted from Iraq and Ukraine
back towards the U.S. Federal Reserve's next move.
MSCI's main emerging market share index was
looking for its first rise in five days, and most Asian and
central and eastern European currencies were steadier after days
of geopolitical unease over Iraq.
"Yesterday, we had this very broad sell-off, but today we
are back to a calmer situation ahead of the Fed," said Murat
Toprak, a director of FX strategy at HSBC in London. "The Iraqi
situation has been partly priced in."
The U.S. central bank is expected to press on with its $10
billion-a-month reductions in stimulus on Wednesday. But it is
also expected to nudge down its economic forecasts, leaving
market watchers eyeing any new hints on future rate rises.
For emerging markets, rising rates in steadier economies
like the U.S. make the yield on their assets comparatively less
attractive. That prospect led to a widespread EM sell-off both
at the beginning of the year and last May and June.
For now, though, markets were taking a breather after an
anxious few days. The costs for protecting against a default by
Russia and Iraqi neighbour Turkey were little changed and bond
market moves were subdued generally.
The South African rand was firmer at $10.75 and
stocks edged up for a second day after platinum
producers and mining union AMCU agreed on the main struts of a
pay offer they hope will end a long-running strike.
Russian and Ukrainian assets, however, were still suffering
from their countries' standoff after Gazprom effectively turned
off Ukraine's gas on Monday in a long-running dispute over
payments and prices.
The rouble and dollar-denominated Russian stocks
both fell towards their lowest levels in almost two
weeks as hopes of a near-term resolution faded badly.
"We will stick to our position of not investing in Ukraine,"
said Viktor Szabo, a fund manager at Aberdeen Asset Management.
"And in Russia we remain extremely cautious."
MESSY FOR ARGENTINA
Argentina's bonds also remain under pressure after the U.S.
Supreme Court on Monday threw out the country's latest appeal
against bondholders still demanding to be paid in full after its
2001 default on $100 billion of sovereign debt.
President Cristina Fernandez vowed to find a way to service
Argentina's other bonds after the decision. But with the legal
difficulties in doing so pushing the country closer to another
default, CDS hit a new five-month high of 2,273 after a huge
spike on Monday.
"The situation in Argentina is important, but not as
important as the devaluation that happened in January," said
"That happened in the context of a broad emerging market
sell-off. This time the situation for EM globally is
significantly better. That is probably the main reason why the
reaction to Argentina has been quite mild."
In eastern Europe, Poland's zloty steadied and
shares in Warsaw bounced back after Poland's central
bank governor, Marek Belka, said he did not plan to resign over
a leaked recording of him using an expletive to describe bank
colleagues and discussing the removal of the finance minister.
Emerging Markets Prices from Reuters
Equities Latest Net Chg % Chg % Chg
Emrg Mkt Indx 1046.90 +0.62 +0.06 +4.41
Czech Rep 1034.17 -0.22 -0.02 +4.56
Poland 2462.21 +15.20 +0.62 +2.55
Hungary 18784.39 -67.53 -0.36 +1.19
Romania 6787.35 -74.09 -1.08 +4.52
Greece 1263.09 +0.78 +0.06 +8.64
Russia 1344.86 -12.94 -0.95 -5.76
South Africa 45824.44 +21.40 +0.05 +10.47
Turkey 78487.43 +841.71 +1.08 +15.76
China 2066.70 -19.28 -0.92 -2.33
India 25521.19 +330.71 +1.31 +20.55
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 27.43 27.42 -0.02 -0.36
Poland 4.14 4.14 +0.08 +0.31
Hungary 307.33 307.06 -0.09 -3.37
Romania 4.40 4.39 -0.22 +1.32
Serbia 115.37 115.33 -0.03 -0.75
Russia 34.75 34.61 -0.40 -5.35
Kazakhstan 183.39 183.51 +0.07 -15.86
Ukraine 11.85 11.88 +0.25 -30.55
South Africa 10.74 10.75 +0.06 -2.74
Kenya 87.60 87.90 +0.34 -1.60
Israel 3.45 3.45 -0.04 +0.48
Turkey 2.14 2.14 +0.27 +0.45
China 6.23 6.23 -0.02 -2.77
India 60.11 60.17 +0.10 +2.82
Brazil 2.23 2.23 -0.02 +5.73
Mexico 13.05 13.05 +0.01 -0.10
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 287 0 0.02 679.04
All data taken from Reuters at 1151 GMT.
Currency percent change calculated from the daily U.S.
close at 2130 GMT
(Reporting by Marc Jones; Editing by Larry King)