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Ukraine's international bonds surge
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Turkey rate decision due
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Oil prices gain more than 3%
By Niket Nishant
Oct 23 (Reuters) - Emerging market assets weakened on
Thursday after the U.S. and the European Union ratcheted up
pressure on Russia, heightening geopolitical risks and casting a
shadow over the region that has posted robust returns this year.
An MSCI gauge of emerging markets equities dipped
0.1% while the currencies gauge also edged 0.1%
lower and was on track for its third straight day in the red if
current levels hold.
The developments underscore how Russia-Ukraine tensions are
still reverberating across regions, and highlight that even
markets with strong long-term fundamentals are not immune to
sudden geopolitical shifts.
NEW SANCTIONS ON RUSSIA
Prospects of a major breakthrough in resolving the conflict
had bolstered hopes among investors this month, but those
expectations quickly faded after a planned summit between U.S.
President Donald Trump and his Russian counterpart Vladimir
Putin was put on hold.
Moscow held nuclear drills on Wednesday, while Washington
hit two of Russia's largest oil companies with sanctions. The EU
also approved a 19th package of sanctions against Russia.
"The key question at this stage is whether sanctions
effectively reduce Russian oil flow. Back in January, the
ultimate impact on Russian flows was limited," ING economists
wrote in a note.
Ukraine's international bonds staged a rally, with issues
maturing in 2035 and 2036 up more than 1 cent each, according to
Tradeweb data.
TURKEY RATE DECISION LOOMS
Investors will also watch Turkey's central bank, with a
policy decision due on Thursday.
Turkish central bankers told foreign investors in meetings
last week that they were increasingly concerned about inflation
and suggested they were ready to slow down the pace of interest
rate cuts, four participants in the discussions told Reuters.
The decision will offer fresh cues to investors at a time
when the political climate in the country has come under fresh
scrutiny.
Investors have been monitoring the market impact of a
politically sensitive court ruling that could reshape the
country's opposition leadership.
"Turkey simply has a credibility issue," said Carlos von
Hardenberg, founder of investment firm MCP Emerging Markets.
"The private sector in Turkey is phenomenal. But in the
absence of a credible clean-up of government policy, you will
continue to see Turkey not being the top preference for emerging
market investors."
The main BIST 100 share index was up 0.8%, but has
still lost 3.9% this month.
INDIAN EQUITIES HIGHER
India's benchmark BSE Sensex climbed 0.7% and the
broader NSE Nifty 50 index advanced 0.7%, in a
broad-based rally led by IT stocks on expectations of a trade
deal with the U.S.
Indian refiners are poised to sharply curtail imports of
Russian oil, Reuters reported. Oil prices rose over 3%.
Saudi Arabia's benchmark index, whose fortunes are
closely tied to oil prices, was 0.3% lower. Oil behemoth Saudi
Aramco's shares eased after hitting a five-month high
on Wednesday.
South Korea's Kospi index eased from a record high
after the Bank of Korea voted to keep its benchmark interest
rate unchanged. Policymakers remain open to a cut in the next
three months, however, governor Rhee Chang-yong said.