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Asian stocks support EM equities

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KOSPI crosses 3,000 mark on post-election rally

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Lira weakens further, analysts see rate cuts coming

By Sruthi Shankar

June 20 (Reuters) - A semblance of calm returned to most

emerging markets on Friday, as worries about an immediate U.S.

involvement in the Iran-Israel conflict eased, in turn putting

pressure on the dollar and oil.

The MSCI index of EM equities climbed 1.1%, supported

by heavyweight Asian bourses including South Korea's Kospi

that rose above 3,000 points for the first time in 3-1/2

years.

Stock markets in Hungary Turkey, Hong Kong

, India rose in the range of 0.8% and 1.3% after

the White House said that President Donald Trump would make a

decision on whether the U.S. would get involved in the Middle

East conflict in the next two weeks, raising pressure on Tehran

to come to the negotiating table.

The Israel-Iran attacks, which entered a second week, have

supported the dollar's safe-haven appeal and lifted crude prices

in recent days, weighing on EM currencies, particularly those of

crude importers such as India and Turkey.

As crude prices eased 2.2% on Friday, the rupee

firmed after hitting a three-month low against the dollar

on Thursday.

The Turkish lira, however, eased to 39.7 per dollar,

also a three-month low, after the central bank held its key

interest rate steady at 46% on Thursday but said inflation

should continue to decline and growth should slow.

"Turkey's central bank kept rates unchanged, but made subtle

changes to its language and communication, which suggest that

the central bank will resume cutting interest rates sooner

rather than later," Commerzbank strategist Tatha Ghose said.

The Thai baht was hit by a political storm after Prime

Minister Paetongtarn Shinawatra faced the prospect of losing her

government's majority as a vital coalition partner looked set to

demand her resignation after just 10 months in power.

The baht weakened for a fifth consecutive session, trading

at 32.78 per dollar.

A gauge of EM currencies hit a record high

earlier this month and its stocks counterpart touched

over three-year highs as broad dollar weakness and optimism

about U.S. trade deals helped sentiment.

EM local currency bond funds enjoyed record inflows in the

past week as Chinese local funds pulled in more money, Barclays

said in a report, citing EPFR data. EM equities fund inflows

were at a three-month high, it said.

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