*

IMF says Mideast escalation poses significant economic

risks

*

U.S. NFP data at 8:30 a.m. ET/1230 GMT

*

Kenya asks IMF to review corruption issues after Western

push

*

Sri Lanka to move forward with 3rd review of $3 bln IMF

bailout

*

Romania interest rate decision due

*

Stocks up 0.4%, FX down 0.2%

By Ankika Biswas

Oct 4 (Reuters) - Hong Kong shares logged a sharp weekly

gain on Friday as investors continued to cheer China's stimulus

measures, while emerging market currencies edged lower ahead of

U.S. jobs data and on tensions in the Middle East.

Hong Kong's Hang Seng index climbed 3% to an over

two-year high, after a bout of profit taking on Thursday

following a six-day winning streak as sentiment remains upbeat

on China's massive economic stimulus proposals.

The index clocked its third straight weekly advance, jumping

31% during the period. China's equity market has been shut for

most of the week for public holidays.

Although on track for its fourth weekly advance, the MSCI EM

stocks index eyed modest gains for the current week

and the currencies index was set for its first

weekly decline in 10 as sentiment soured in the wake of

escalating Middle East conflict.

The Israel shekel fell for the fourth day, touching a

near two-month low.

The International Monetary Fund said an escalation of the

conflict could have significant economic ramifications for the

region and the global economy.

The erosion of investors' risk-on sentiment comes at a time

when China's stimulus measures and the Federal Reserve's

50-basis-point rate cut have boosted the EM asset classes.

A rush to safe-haven assets have seen the dollar

hover at six-week highs, also boosted by uncertainties around

upcoming U.S. rate cuts following an improving economic picture

and a relatively hawkish tone from Federal Reserve Chair Jerome

Powell.

"Many EM nations are continuing to hold as long as they can

before issuing Eurobonds and other USD-denominated paper to

foreign investors, clearly looking to get the biggest bang for

their buck on yields," said Verto's FX Trader, Charlie Bird.

All eyes are now on the U.S. non-farm payrolls report, a day

after data showed the labour market gliding at the end of the

third quarter.

Meanwhile, Sri Lanka plans to move ahead with the third

review of its nearly $3 billion programme of support from the

IMF.

The rupee was trading at a 15-month high against the

dollar, while the main stock index gained nearly 1% to

its July highs.

Hungary's main stock index outperformed its Central

and Eastern European peers, rising over 1%. Romania's monetary

policy decision is due during the day, with interest rates

expected to be kept unchanged.

Meanwhile, Reuters reported Kenya's government has asked the

IMF to conduct an official assessment of corruption and

governance issues, after a push by Western nations.

HIGHLIGHTS:

** China stimulus draws investors back to offshore bonds of

troubled property sector

** Slower Philippine inflation in September gives room for

rate cuts

** Czech central bank will be cautious with further rate

cuts, governor says