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EM stocks up 1.1%, FX flat

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Russia's rate decision due shortly

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Moody's to review Romania's credit rating

By Pranav Kashyap and Twesha Dikshit

Sept 12 (Reuters) - An index tracking emerging market

stocks was on track for its best week since September 2024 on

Friday, even as Turkey's stocks lingered near two-month lows and

Russia braced for an interest rate decision later in the day.

The risk mood in Turkey remained grim. Istanbul stocks

fell for a third straight week and the lira, one

of the year's weakest performers, flirted with a 10th

consecutive weekly loss despite a modest 0.2% bounce on the

day.

Turkish assets have come under pressure as President Tayyip

Erdogan's main opposition has faced a legal crackdown. Attention

now pivots to whether the main opposition leader is ousted from

his post in a Monday court ruling - a test of Turkey's fragile

balance between democracy and autocracy.

Separately, the central bank on Thursday slowed its easing

cycle with a 250 basis-point rate cut.

"The focus will remain on politics and the crackdown on the

CHP party. Although inflation is set to slow gradually, it will

exceed the central bank's target," said Phoenix Kalen, head of

EM strategy at Societe Generale.

"We anticipate that the policy of gradual lira depreciation

will continue."

Russia's rouble is on track for its worst week of 2025 -

off more than 4% on the week - as the central bank was poised to

trim rates to roughly 16% and the conflict in Ukraine keeps

draining Russia's slowing economy.

The rouble's slump was stoking fresh worries over a

flat-lining economy, a swelling budget gap, and looming Western

sanctions that could hit buyers of Russian oil-Moscow's main

source of revenue.

Expectations of a rate cut by the Federal Reserve kept EM

assets humming even as politics roiled from Ankara to Buenos

Aires to Jakarta. With cracks widening in U.S. jobs data,

analysts note investors are nudging money out of Wall Street.

The MSCI EM equity gauge leapt 1.2% to its highest

in more than four years and is set for a sixth consecutive

advance, while EM currencies edged higher for the week.

Chinese domestic AI optimism and relatively low political

noise drew inflows and continued to lift local equities. The

Shanghai Composite was at its highest since August 2015

and keeping the CSI 300 was near a peak last seen in

March 2022, while Hong Kong's Hang Seng hovered near its best

level since August 2021.

Meanwhile, Moody's reviews Romania credit rating later in

the day, with the country clinging to the last rung of

investment grade, with negative outlooks across the board.

The leu was little changed, while stocks in

Bucharest inched up 0.1%.

Romania sits at the cusp of investment grade with negative

outlooks, even after a new coalition rammed through tax and

spending measures to tame a deficit that is the biggest in the

EU-and helped push inflation to its highest since mid-2023.

The International Monetary Fund forecast slower growth in

Romania this year and urged the country to push ahead with

fiscal consolidation plans as it battles with EU's highest

budget gap and the risk of a credit downgrade.

Indian equities were up 0.5% ahead of the

country's August inflation data.

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