* Most emerging market stocks also slip amid subdued risk

appetite

* India could scrap capital gains tax on foreign

portfolio investment in government securities - source

* Turkey's unemployment ticks up

By Avinash P and Niket Nishant

June 4 (Reuters) - The rupiah sunk to a fresh all-time

low on Thursday, prompting efforts from Indonesia's central bank

to stabilize the currency, while the South Korean won hit

its lowest since March 2009 on elevated geopolitical

uncertainty.

Most emerging market stocks also fell as investor confidence

was rattled by the U.S.-Iran war, which remains an overhang

despite ongoing diplomatic efforts to secure a peace deal.

The MSCI index of EM stocks slipped 1.7% and was

on track for its second-straight day of losses, while the EM

currencies gauge declined 0.4%.

The greenback hovered near two-month

highs, pressuring most currencies, as a flare-up in the Middle

East conflict this week curbed risk appetite.

The Indonesian rupiah weakened 0.5% against the

dollar and breached the 18,000 level for the first time,

prompting the country's central bank to intervene to arrest the

free fall.

Local stocks also fell 1.7% to their lowest level in

nearly six years.

Other major markets retreated too, with South Korean

and Taiwanese indexes easing from record levels,

slipping 1.8% and 1.7% respectively.

The bourses have soared more than 100% and 68%,

respectively, in 2026, driven by an eye-popping AI-led rally

that has powered the broader MSCI emerging markets stock gauge

to record levels.

"While earnings expectations - especially in

technology-heavy economies such as the U.S., Taiwan and South

Korea - are tilted to the upside on AI spending, the rest of the

economy finds itself struggling with higher borrowing costs,

supply-chain disruptions (due to the Iran war and trade war) and

a weakening economic outlook," said Ipek Ozkardeskaya, senior

analyst at Swissquote Bank

South Korean President Lee Jae Myung's ruling Democratic

Party swept most major local elections on Wednesday, but the

opposition conservative incumbent Oh Se-hoon won another term as

Seoul mayor.

In South Asia, India plans to scrap capital gains tax on

foreign portfolio investments in government securities, which

could help boost such inflows, a source familiar with the matter

told.

Local benchmarks were flat. Investors look

ahead to the Reserve Bank of India's rate decision on Friday.

Policymakers are widely expected to keep the rates unchanged.

Turkey's unemployment rate rose 0.1 percentage point

month-on-month to 8.2% in April, official data showed.

Local stocks fell 1%, while the lira was

flat against the dollar.

South African rand appreciated 0.6%, but equities

fell 0.5%.

Most currencies in emerging Europe firmed against the euro

with the Hungarian Forint adding 0.3%. Equities in

Budapest dipped 0.2%, while Bucharest was flat.

Lebanon's 10 year bond yields were unchanged

following the announcement of the ceasefire.

Markets in Poland and Brazil will be closed on Thursday for

a holiday.

HIGHLIGHTS:

** Goldman lifts MSCI EM target on AI boost, flags Iran

deal relief for forex, bonds

** Ghana says Africa debt is 'mispriced' and targets

investment-grade rating

** Africa Finance Corp raises record $2 billion syndicated

loan

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see

(Reporting by Avinash P and Niket Nishant in Bengaluru; Editing

by Joyjeet Das)