* MSCI EM equities headed for strongest quarter since 2009
* Bolivia will adopt a flexible exchange-rate system
* Hungary's 2026 deficit may top 7% of GDP, prime minister
says
* Serbian assets in focus after Vucic offers early elections
By Ragini Mathur
June 29 (Reuters) - Emerging-market stocks edged higher on
Monday while currencies held broadly steady, as investors
weighed a brief flare-up in Middle East tensions against
lingering doubts over a fragile ceasefire in the region.
The MSCI emerging-market equities index rose 0.2%,
while its currency counterpart was little
changed.
A pause in the latest exchange of attacks in the Middle East
offered some relief to markets. But the mood remained fragile,
with investors also weighing stretched technology valuations, a
stronger dollar and the prospect that resilient U.S. growth
could keep Federal Reserve rates elevated for longer.
Oil prices, which have surrendered nearly all their gains
since the U.S.-Israeli conflict with Iran flared in late
February, initially rose on renewed hostilities before easing as
prospects for fresh talks raised hopes of salvaging an interim
deal.
That helped steady sentiment in oil-sensitive emerging
markets, though Asian equities remained under pressure as the
region's high-flying technology shares continued to retreat.
"As we move into Q3, the focus is already turning to
shifting geopolitics, a strong U.S. economy, the potential for
fresh Federal Reserve rate hikes, and a selloff in tech stocks
that is particularly acute in Asia," said Kathleen Brooks,
research director at XTB.
South Korea's KOSPI, a bellwether for the
artificial-intelligence trade, fell as much as 3.4% after losing
7% last week, before paring losses to close 0.2% lower.
On the other hand, Taiwan stocks gained 1%. The
index is up 56% this year, making it the region's second-best
performer behind the KOSPI's 97% rally.
Those outsized gains in South Korea and Taiwan have powered
the broader MSCI emerging-market equities index, leaving it on
track for its strongest quarter since 2009.
In central Europe, Serbian assets were in focus after
thousands of protesters gathered in Kraljevo on Sunday,
maintaining pressure on President Aleksandar Vucic a day after
he said he would step down within weeks to allow early
presidential and parliamentary elections.
Although many protesters welcomed Vucic's planned
resignation, some fear he may try to retain influence behind the
scenes. Serbia's dinar was flat against the euro.
Elsewhere in emerging Europe, currencies weakened against
the euro but were broadly steady versus the dollar. Regional
shares edged lower, with Hungary's benchmark down 0.6%,
while the forint slipped 0.2%.
Hungary's 2026 budget deficit could exceed 7% of economic
output even if the country secures billions of euros in European
Union funding, Prime Minister Peter Magyar said.
Turkish stocks fell 0.3%, while the lira
was steady.
In South Africa, the rand edged 0.2% lower as gold, a key
export, eased, while Johannesburg's main share index
rose 0.9%.
Meanwhile in other EMs, Bolivia will adopt a flexible
exchange-rate system, the government said on Friday, effectively
devaluing the currency by ending a 15-year dollar peg in a major
policy shift aimed at restoring economic stability.
HIGHLIGHTS:
** South Korea unveils $576 billion AI-chip investment
powered by Samsung, SK Hynix
** Venezuela quake death toll nears 1,500 as rescue work
goes on
** Ethiopia reaches preliminary deal with bondholders to
restructure 2024 Eurobond
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