October 19, 2016 / 9:50 AM / a year ago

EMERGING MARKETS-EM stocks struggle higher on China data, FX mixed

LONDON, Oct 19 (Reuters) - Emerging stocks edged higher on Wednesday after data from China showed the world’s second largest economy grew as expected last quarter, though curriences were largely unmoved by this with only Turkey’s lira bouncing off a record low.

A raft of data showed China’s economy grew 6.7 percent in the third quarter - in line with expectations - and looks set to hit Beijing’s full-year target, thanks to stronger government spending, record bank lending and a red-hot property market. Yet this also adds to a growing debt pile and a separate set of data showed industrial output grew less than expected.

MSCI’s emerging markets benchmark added 0.3 percent to Tuesday’s 1.5 percent jump, lifted by gains in Russia , central and eastern Europe and select Asian bourses such as Taiwan.

Yet stocks in mainland China and Hong Kong came under some pressure, trading flat to lower.

The cautiously supportive numbers were bound to set the tone for the rest of the week, said Cristian Maggio, head of EM strategy at TD Securities.

“The fact that (the data) came in line with expectations is neutral, but it removes the risk of weaker growth,” said Maggio. “That gives the rest of emerging markets the liberty to focus on different aspects, and the move seems to be positive.”

However, the Chinese economy data provided little inspiration to currencies.

Russia’s rouble traded unchanged against the dollar, also shrugging off oil prices jumping 1.5 percent on the back of a drop in U.S. crude inventories and declining production in China.

South Africa’s rand reversed earlier losses to struggle 0.1 percent higher in its third day of gains after data showed the country’s headline consumer inflation quickened to 6.1 percent year-on-year in September.

Analysts were divided if that could lead to a rate hike in November given the fragile state of the overall economy.

“The (central) bank will probably ‘look through’ this very slight breach of the target, as it has done several times in the past,” Capital Economics wrote in a note to clients.

“Given the weakness of the economy, policymakers may wish to hold fire rather than risk damaging the very fragile economy.”

Turkey’s lira, which has weakened more than 5 percent against the dollar since the start of the year, chalked up some of the biggest gains, rising 0.6 percent and pulling away from recent record lows. Policymakers at the central bank, which meets again on Thursday, have been under pressure from the government to cut rates.

“There is a common perception the Turkish central bank will stop cutting rates soon,” Luis Costa at Citi wrote in a note to clients. “Maybe after the next 25 basis points cut in the upcoming meeting.”

Policymakers at Brazil’s central bank meeting later in the day are expected to deliver their first cut in interest rates in four years in a bid to kickstart Latin America’s biggest economy. Brazil’s rates are currently some of the highest in the world at 14.25 percent.

Investors were also awaiting pricing on Saudi Arabia’s bumper debut bond sale, which could be between $10-$20 billion, one of the largest of any emerging economy.

Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Ch

on year

Morgan Stanley Emrg Mkt Indx 912.12 +3.57 +0.39 +14.86

Czech Rep 916.75 +1.42 +0.16 -4.14

Poland 1725.46 +4.25 +0.25 -7.19

Hungary 29077.29 +64.61 +0.22 +21.56

Romania 6857.55 +13.08 +0.19 -2.10

Greece 595.76 +1.93 +0.33 -5.64

Russia 992.86 +5.92 +0.60 +31.15

South Africa 44898.60 +355.48 +0.80 -1.96

Turkey 78825.19 +484.79 +0.62 +9.90

China 3085.32 +1.45 +0.05 -12.82

India 28048.64 -2.24 -0.01 +7.39

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2016

Czech Rep 27.01 27.00 -0.03 -0.05

Poland 4.31 4.31 -0.08 -1.30

Hungary 306.39 306.55 +0.05 +2.69

Romania 4.50 4.50 +0.16 +0.53

Serbia 123.09 123.08 -0.01 -1.32

Russia 62.42 62.47 +0.07 +16.86

Kazakhstan 331.55 332.20 +0.20 +2.70

Ukraine 25.65 25.63 -0.08 -6.62

South Africa 13.92 13.89 -0.20 +11.06

Kenya 101.30 101.20 -0.10 +0.89

Israel 3.83 3.82 -0.16 +1.58

Turkey 3.07 3.09 +0.69 -5.08

China 6.74 6.74 +0.05 -3.63

India 66.66 66.72 +0.09 -0.69

Brazil 3.19 3.19 -0.02 +24.20

Mexico 18.58 18.61 +0.14 -7.59

Debt Index Strip Spd Chg %Rtn Index

Sov‘gn Debt EMBIG 365 0 .08 7 63.84 1

All data taken from Reuters at 09:13 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.

For GRAPHIC on emerging market FX performance 2016, see link.reuters.com/jus35t

For GRAPHIC on MSCI emerging index performance 2016, see link.reuters.com/weh36s

For GRAPHIC on MSCI emerging Europe performance 2016, see link.reuters.com/jun28s

For GRAPHIC on MSCI frontier index performance 2016, see link.reuters.com/zyh97s

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see ) (Additional reporting by Claire Milhench; Editing by Raissa Kasolowsky)

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