November 29, 2017 / 10:15 AM / 2 years ago

EMERGING MARKETS-N.Korea test caps emerging stocks gains, lira firms

LONDON, Nov 29 (Reuters) - Another missile test in nuclear-armed North Korea capped gains in emerging equities on Wednesday despite a strong run on Wall Street fuelled by U.S. tax reform progress, while the Turkish lira firmed after a period of weakness.

Across the emerging market complex, investor sentiment was helped by global equities setting new record highs after a strong session on Wall Street.

Investors were encouraged by signs of progress on U.S. tax cuts and U.S consumer confidence surging to a near 17-year high in November.

Most of Emerging Europe opened higher, with Turkish stocks up 0.5 percent and Czech shares up 0.3 percent. Polish bank sector shares also hit a new two-and-a-half year high.

But MSCI’s benchmark emerging stocks index failed to rise any more as Asian markets were cautious following another missile test by North Korea, alongside concerns over China’s attempts to crack down on leverage.

In addition, the Trump administration launched a new trade action against China, opening the first U.S. government-initiated anti-subsidy and anti-dumping probes in decades into imports of Chinese aluminum alloy sheet.

Both South Korean stocks and China’s blue chip index ended slightly lower, whilst Hong Kong shares fell 0.2 percent.

“You have two opposing factors,” said Jakob Christensen, head of emerging market research at Danske Bank.

“On the one hand you have increased risk from North Korea. But part of the negative impact may be outweighed by the news that the U.S. tax reform process is moving forwards - this will be good for global growth, which is a positive for Asian shares.”

South Korea’s won gained 0.8 percent, pushing past a two-and-a-half year high on expectations that the Bank of Korea would raise interest rates at its meeting on Thursday.

A weaker dollar also allowed beaten-down currencies such as the Turkish lira to firm after plumbing record lows last week. The lira strengthened 0.3 percent, leading emerging currency gains, despite ongoing diplomatic tensions with the United States.

In the U.S. court case that has added to strained relations between Washington and Tehran, a Turkish-Iranian gold trader has pleaded guilty to conspiring to evade U.S. sanctions against Iran. He will now testify against a Turkish bank official who is charged with arranging illegal transactions involving American banks.

Christensen said that perhaps at current levels, traders saw a good entry point for carry-related short-term trading strategies. “Maybe the impact of this trial has been factored into the market now,” he added.

The Mexican peso also firmed as much as 0.25 percent after the incoming central bank governor laid out a cautious stance that could imply steady or even higher interest rates ahead.

Russia’s rouble strengthened 0.2 percent but stocks fell 0.8 percent, following oil prices lower on doubts that oil group OPEC and Russia will agree to extend a crude output cut to cover all of 2018.

The Polish zloty also jumped to a five-and-a-half month high against the euro but the Hungarian forint remained under pressure, slipping 0.2 percent. For GRAPHIC on emerging market FX performance 2017, see For GRAPHIC on MSCI emerging index performance 2017, see

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley Emrg Mkt Indx 1146.76 +0.26 +0.02 +32.99

Czech Rep 1055.91 +2.06 +0.20 +14.57

Poland 2478.36 -7.35 -0.30 +27.23

Hungary 39054.06 -188.12 -0.48 +22.03

Romania 7807.39 +4.77 +0.06 +10.20

Greece 735.40 +9.23 +1.27 +14.26

Russia 1151.96 -7.45 -0.64 -0.03

South Africa 53896.03 +250.59 +0.47 +22.76

Turkey 02555.81 +487.78 +0.48 +31.25

China 3338.00 +4.35 +0.13 +7.55

India 33646.56 +27.97 +0.08 +26.37

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2017

Czech Rep 25.47 25.48 +0.05 +6.03

Poland 4.20 4.20 +0.08 +4.89

Hungary 311.14 310.64 -0.16 -0.75

Romania 4.64 4.64 -0.02 -2.26

Serbia 119.37 119.50 +0.11 +3.33

Russia 58.29 58.38 +0.15 +5.10

Kazakhstan 330.76 331.60 +0.25 +0.87

Ukraine 27.02 26.88 -0.51 -0.06

South Africa 13.64 13.66 +0.10 +0.65

Kenya 103.15 103.30 +0.15 -0.76

Israel 3.50 3.51 +0.11 +9.89

Turkey 3.95 3.96 +0.34 -10.71

China 6.60 6.60 +0.10 +5.23

India 64.32 64.40 +0.12 +5.64

Brazil 3.21 3.21 -0.00 +1.26

Mexico 18.53 18.54 +0.06 +11.79

Debt Index Strip Spd Chg %Rtn Index

Sov’gn Debt EMBIG 313 -1 .02 8 05.42 1

All data taken from Reuters at 09:53 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.

Reporting and graphic by Claire Milhench; Editing by Raissa Kasolowsky

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