May 16, 2019 / 8:41 AM / a month ago

EMERGING MARKETS-Emerging stocks stall as Huawei sanction revives trade fears

* U.S. adds China’s Huawei to trade blacklist

* Emerging stocks wilt after Wednesday’s bounce

* Korean won falls 1% amid intervention talks

By Sruthi Shankar

May 16 (Reuters) - Trade worries kept emerging market stocks under pressure on Thursday after the Trump administration hit Chinese telecoms giant Huawei with severe sanctions, adding strain to the nations’ already fraught relationship.

The MSCI index of developing world stocks, down 6% in a renewed global sell-off of riskier assets this month due to the conflict, eased 0.23% on the back of sharp falls for South Korea, Taiwan and Philippines.

China’s stock markets , however, rose on hopes that Beijing will roll out fresh stimulus to shore up an economy showing signs of strain from the trade war.

The U.S. Commerce Department said on Wednesday it was adding Huawei Technologies Co Ltd and 70 affiliates to its “Entity List” - a move that bans the company from acquiring components and technology from U.S. firms without government approval.

“Certainly the news shows there are structural tensions between the United States and China that are far from being resolved and there is scepticism on both sides,” said Jakob Christensen, head of EM research at Danske Bank.

“It’s too early to call calmness.”

China strongly opposed the move, adding Washington should avoid further impacting Sino-U.S. trade relations.

A report from the Institute of International Finance showed capital flight from emerging markets in recent weeks is the strongest since the start of a broad correction in global stock markets last October.

Chinese stocks saw outflows of $1.5 billion on Monday, after investors took $2.5 billion off the table last week, the report said.

The yuan held steady against the dollar amid market talks that Chinese authorities could sell more U.S. Treasuries as an effective retaliatory measure against Washington’s latest tariff hikes.

South Korea’s won earlier hit a 28-month low after a senior finance ministry official told Reuters that “authorities are closely watching the foreign exchange market”, usually taken by dealers as a warning on the currency.

The Turkish lira weakened again as U.S. officials on Wednesday asked Anakara to delay its decision to buy the S-400 missile defences.

Tensions between Turkey and the United States have run high over Ankara’s decision to buy the Russian missile defences, sending the lira sliding nearly 12% this year.

The Mexican peso was largely steady before its central bank meeting, where policymakers are seen holding interest rates steady amid signs of weakness in the economy.

The Bank of Mexico’s main rate has been at 8.25% since Dec. 20.

For GRAPHIC on emerging market FX performance 2019, see tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance 2019, see tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Sruthi Shankar in Bengaluru; Editing by Andrew Cawthorne)

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