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EM stocks down 0.2%; FX down 0.2%

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Fed cuts rates by 25 basis points

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Russian explores VAT tax hike

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South Africa's interest rate decision due later in the day

By Pranav Kashyap

Sept 18 (Reuters) - Emerging market assets stumbled on

Thursday, caught in the crosswinds of a cautious Federal Reserve

rate cut, as investors assessed bets amid the central bank's

tempered tone on future policy moves.

EM assets hit the brakes after a steady rally, as the Fed's

25-basis-point rate cut came with a dose of caution. A key EM

equities gauge slipped 0.2% after gaining for nine

straight days in the run-up to the decision, while a similar

index for currencies retreated after rising in

eight of the last nine sessions.

The pullback followed Fed Chair Jerome Powell's signal that

the cut was a risk-management move - not the start of an

aggressive easing cycle - leaving investors guessing on the pace

of future action. Even gold struggled for direction.

"You're having a bit of a consolidation in financial markets

following the FOMC meeting," said Elias Haddad, senior markets

strategist at Brown Brothers Harriman.

"Generally speaking, risk sentiment is good because a cut

will further fuel the rally, but the fact that it's a neutral

cut and not a dovish cut limits the exuberance in risk assets."

Still, the Fed's move gave some breathing room for other EM

central banks to ease. Saudi Arabia, the UAE, Qatar, Bahrain,

Kuwait, Oman, and Hong Kong all delivered 25-basis-point cuts.

Meanwhile, China and Brazil held rates steady.

South Africa's central bank decision was due later in the

day. The rand slipped 0.2%, while stocks in Johannesburg

fell 0.4%, with expectations the central bank will keep

rates on hold at 7%.

The Russian rouble was one of the currencies to have

sizable moves on the day, jumping 1% against the dollar.

The Russian government was considering raising the rate of

value-added tax to keep the budget deficit in check and maintain

reserves, four sources told Reuters.

Chinese semiconductor stocks,

surged, with the Shanghai Composite flirting with its

highest level since August 2015. Huawei broke its silence on AI

ambitions. The tech giant said it will launch four new versions

of its Ascend AI chip over the next three years - marking its

boldest move yet to challenge Nvidia's ( NVDA ) dominance.

Stocks in central and eastern Europe edged up, but traded in

tight ranges. Hungary's rose 0.8%, after falling for four

sessions.

Ukraine's international dollar bonds rose nearly 1 cent. The

country was due to receive missiles for Patriot air defence

systems and HIMARS rocket launchers in the first batch of

weapons being sent under a new funding programme agreed by the

U.S. and Kyiv's European allies.

Turkish stocks hit an over two-week high, gaining

for three out of four sessions. On Monday, Turkish assets

collectively rose after a court adjourned a ruling on ousting

the country's main opposition party's leader.

(Reporting by Pranav Kashyap in Bangalore; Editing by Ros

Russell)