* Stocks hit five-day high ahead of FOMC meeting
* Turkish stocks fall 2 pct on probe into alleged bribery
* Hungarian forint rises after ruling on FX loans
* Ukrainian bonds dip, await possible Kremlin deal
By Carolyn Cohn
LONDON, Dec 17 (Reuters) - Emerging stocks edged up on Tuesday ahead of a U.S. Federal Reserve meeting which may decide on a withdrawal of monetary stimulus, though Turkish stocks fell following high-profile detentions as part of an investigation into alleged bribery.
The Federal Open Market Committee starts a two-day policy meeting on Tuesday and investors are on tenterhooks over when it will begin to reduce its $85 billion-a-month bond-buying programme, a major driver of risky assets.
But as tapering comes closer after over six months of waiting, emerging markets are more prepared, analysts said.
“The market is generally calm going into the FOMC - the view has changed to that of the market being through tapering already,” said Ishitaa Sharma, emerging markets strategist at Citi.
The MSCI emerging equities index rose a quarter point to a five-day high.
Turkish stocks dropped more than 2 percent after media reports said police had detained well-known businessmen and three cabinet ministers’ sons as part of an investigation into alleged bribery linked to public tenders.
Shares in state-run lender Halkbank fell 5.7 percent after sources familiar with the matter said financial police had searched its headquarters in Ankara.
Halkbank officials could not immediately be reached for comment and it was not immediately clear whether the search of its offices was related to the detentions.
“There is no official confirmation so we have no idea what’s happening,” said Sharma.
Turkey’s five-year credit default swaps rose 3 basis points to 192 bps, according to Markit.
Turkey’s central bank is expected to keep rates on hold at its policy meeting at 1200 GMT.
The forint rose 0.7 percent towards 2-1/2 week highs set on Monday after a Hungarian court ruling that banks were not to blame for borrowers losing out on foreign currency loans.
Hungarian bank OTP fell 0.7 percent, however, after surging more than 4 percent on Monday on the ruling, which cuts the risk the government will make lenders foot the bill for a massive loan relief scheme.
Hungarian stocks dropped 0.5 percent after rallying 2 percent on Monday to two-week highs.
Hungary’s central bank is expected to cut rates by 20 basis points on Tuesday, to 3 percent.
The Czech crown dipped towards 27.6 per euro ahead of an expected unchanged Czech rate decision. The Czech crown has been weakening even further following central bank intervention to weaken it to the 27 level last month.
Ukraine dollar debt prices fell slightly after getting a boost on Monday from expectations of a deal with Russia, with President Viktor Yanukovich meeting Vladimir Putin at the Kremlin on Tuesday.
Protests following the government’s decision to ditch a landmark trade deal with the European Union have hit Ukrainian assets in recent weeks. Investors worry that without support from either the EU or Russia, Ukraine will struggle to repay its debts next year.
Five-year credit default swaps rose 2 bps, according to Markit, to 1,050 bps, at distressed levels but off recent highs.
“Russian loans won’t change the Ukrainian macro picture at all as they haven’t done in the past, and they certainly won’t address the needs of protesters in Ukraine, which include reforms and a desire to place the country on a growth path,” Commerzbank analysts said in a client note.
Investors see a devaluation as more likely than a default, however, given the country’s dwindling foreign exchange reserves.
Ukraine 1-year forward prices have deteriorated rapidly this month, to 10.24 per dollar from 9.57 at the end of November, pricing in a 19 percent depreciation in the currency over the next year.
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