(Updated at 0930 GMT)

*

China's industrial profit growth slows sharply in May

*

Foreigners buying Indian debt before index inclusion

*

Kenya tax hike withdrawal to complicate IMF funding

-Moody's

*

Bolivia coup attempt fails

*

Stocks off 0.4%, FX flat

By Johann M Cherian

June 27 (Reuters) -

Risk sentiment was fragile in emerging markets on Thursday

after lacklustre data out of China and ahead of the Czech

Republic and Turkey's monetary policy decisions, while the rand

weakened to a two-week low as key cabinet appointments in South

Africa loomed.

MSCI's index tracking equities in the developing world

lost 0.4%, with heavy-weight China's blue-chip index

and the Shanghai Composite Index dropping 0.7%

and 0.9%, respectively, after data showed industrial profits in

the world's top consumer rose at a sharply slower pace in May.

A currency-tracking index was flat as

investors awaited monetary policy decisions from the central

banks of Turkey and the Czech Republic.

The koruna slipped 0.1% against the euro, with

markets bracing for a smaller 25 basis point (bps) rate cut to

5%, with inflation drawing closer to the central bank's 2%

target.

The lira traded near record lows at 32.89 to the

dollar with expectations that interest rates will be left on

hold at 50%. After years of rate cuts that saw the currency

plummet, the country shifted to a more orthodox policy last

year.

"It's also about what they are doing with fiscal policy

because them raising minimum wages and having a lax fiscal

policy which also drove inflation quite a lot in the beginning

of the year," said Jakob Ekholdt Christensen, senior EM

strategist at BankInvest.

In South Africa, the rand slipped 1%, and yield on

the benchmark bond rose over 15 bps as markets

continued to wait for the cabinet unveiling of the country's

first coalition government.

Kenya's shilling dipped 0.6%. Rating agency Moody's

said President William Ruto's decision to withdraw planned tax

hikes would complicate the disbursement of future International

Monetary Fund funding.

In South Asia, India's benchmark bond was flat,

but the rupee inched up 0.14%, among indicators that

foreigners were buying the country's sovereign debt ahead of its

inclusion in JPMorgan's emerging markets debt index on Friday.

Elsewhere, Zambia's kwacha inched up 0.2% in thin

trade after the International Monetary Fund (IMF) said it

approved a disbursement of some $569.6 million following a

review, and increased its loan to $1.7 billion from $1.3

billion.

Bolivia's currency was largely unchanged after a

military assault on the presidential palace was stopped late on

Wednesday.

Later in the day, markets will also parse comments from U.S.

presidential candidates during their first debate ahead of the

November elections, to assess their stance on foreign policy.

Christensen said focus would be on the candidates' stances

on foreign policy and on any signs that their fiscal policy

proposals might drive up local price pressures if enforced into

the future.