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Indian markets slide after early vote count

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Rand slides again on political drag

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Zambia bondholders to vote on debt restructuring

By Sruthi Shankar

June 4 (Reuters) - Emerging market stocks looked on

course for their steepest fall in seven weeks on Tuesday, with

Indian shares slumping on nervousness around election results,

while political uncertainty continued to weigh on the South

African rand.

The MSCI EM equities index fell 1.6%, having

dropped as much as 1.9% earlier in the session. The benchmark

was set for its biggest percentage drop since April 16.

India's main stock indexes slid more than

5% each, pulling back from record levels hit on Monday, as vote

counting trends showed Prime Minister Narendra Modi's alliance

was winning a majority of seats in the general election, but

well short of the landslide predicted in exit polls.

The updates spooked financial markets which had expected a

hefty win for Modi, with the rupee falling to 83.5 per

dollar and benchmark bond yields rising.

"The margin of the BJP victory will be less than previously

expected. The strong gains on equities and the rupee that we saw

yesterday looked very much overdone," said Jon Harrison,

managing director for EM macro strategy at TS Lombard.

"The reality is that any new government is going to face a

lot of pressure to do more welfare spending and they're going to

be constrained in terms of the reforms that they can do."

Stock markets in South Africa, Hungary and

Poland also fell as investors considered the prospect

that the U.S. economy's "exceptionalism" may be starting to

unwind as manufacturing activity there further weakened.

The dollar ticked up on Tuesday following losses overnight,

weighing broadly on EM currencies.

The Official Monetary and Financial Institutions Forum said

more global reserve managers plan to increase exposure to the

now high-yielding U.S. dollar as their interest in China's yuan

has soured due to low returns and geopolitical tensions.

The South African rand fell more than 1% to trade

at 18.72 per dollar after data showed the economy contracted

0.1% in the first quarter in quarter-on-quarter

seasonally-adjusted terms. Economists polled by Reuters had

predicted a growth of 0.1%.

The currency was hammered last week after the African

National Congress (ANC) lost its majority in last week's

election. The ANC has up to two weeks to agree to a coalition

pact.

Meanwhile, Tuesday will see Zambia's international

bondholders vote through their part of a $13.4 billion debt

restructuring and make it the first to complete a full-blown

rework under the G20-led 'Common Framework' architecture.

HIGHLIGHTS:

** Hungary's Q1 GDP up 1.1% y/y, in line with the first

reading

** Oman sovereign wealth fund says total assets reach $49.98

bln in 2023

** Brazil's IPC-Fipe price index rises in May

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