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EMERGING MARKETS-Stocks hit 11-day high on Spain, forint weak

Tuesday, 2 Oct 2012 | 6:24 AM ET

LONDON, Oct 2 (Reuters) - Emerging stocks hit 11-day highs on Tuesday and emerging debt spreads tightened on mounting expectations of an imminent bailout request from Spain, while the forint weakened on expectations of lower interest rates in Hungary.

Emerging market share indexes have fallen in recent weeks on resurging worries about the euro zone periphery, after they got a boost in mid-September from news of a third round of U.S. quantitative easing.

Benchmark emerging equities

were up slightly after hitting their highest since Sept. 21, and emerging sovereign debt spreads

tightened by 2 basis points to 302 bps over U.S. Treasuries. Chinese markets were closed for holidays.

Amid strong global demand for emerging market debt, Poland attracted initial interest of 2.5 billion euros ($3.2 billion) for a 12-year Eurobond this week at mid-swaps plus around 145 bps.

The forint

hit its weakest level against the euro in nearly four weeks on easing expectations and uncertainty over Hungary's talks with the International Monetary Fund about a financial backstop.

Three of the Hungarian central bank's seven rate setters gave an interview to Reuters on Monday, in which they said a cautious rate-cutting cycle is now under way to help the recession-hit economy and that the bank is still targeting inflation.

"There are a lot of worries about the government's attitude towards IMF negotiations, and it's also very clear that the Monetary Policy Council is split in the middle, with the government-appointed council members being in favour of more monetary easing," said Lars Christensen, chief analyst, emerging markets at Danske in Copenhagen.

The cost of buying protection against a Hungarian sovereign default rose 6 bps in the five-year credit default swaps market to 380 bps, according to Markit.

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GRAPHIC on MSCI emerging index performance 2012:

GRAPHIC on MSCI emerging Europe performance 2012:

GRAPHIC on MSCI frontier index performance 2012:

For CENTRAL EUROPE market report:

For TURKISH market report: For RUSSIAN market report:

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($1 = 0.7749 euros)

(Reporting by Carolyn Cohn and Shadia Nasralla; editing by Jane Baird)

((carolyn.cohn@reuters.com)(Reuters Messaging carolyn.cohn.thomsonreuters.com@reuters.net)(+44 207 542 6320))

((Emerging Markets Prices from Reuters

Equities Latest Net Chg % Chg % Chg on year Morgan Stanley Emrg Mkt Indx

1006.62 +1.54 +0.15 +9.85

Poland

2413.59 +13.79 +0.57 +12.55

Hungary

18727.78 -58.03 -0.31 +10.33

Romania

4767.75 +17.34 +0.37 +9.93

Russia

1508.81 -5.00 -0.33 +5.20

South Africa

32177.98 +92.17 +0.29 +13.02 Turkey 67199.87 +444.98 +0.67 +31.08 India 18823.91 +61.17 +0.33 +21.80 Currencies Latest Prev Local Local close currency currency % change % change in 2012 Czech Rep 25.11 25.08 -0.13 +1.74 Poland 4.10 4.11 +0.17 +8.90 Hungary 285.41 285.80 +0.14 +10.23 Romania 4.52 4.52 +0.02 -4.38 Serbia 115.60 115.39 -0.18 -7.48 Russia 31.09 31.20 +0.33 +3.54

Kazakhstan

150.17 150.04 -0.09 -1.14 Ukraine 8.15 8.15 +0.00 -1.87

South Africa

8.32 8.36 +0.46 -3.05 Kenya 84.90 85.10 +0.24 +0.06 Israel 3.88 3.91 +0.59 -1.94 Turkey 1.79 1.79 -0.13 +5.13 China 6.28 6.28 +0.00 +0.16 India 52.39 52.37 -0.04 +1.18 Brazil 2.03 2.03 -0.08 -8.13 Mexico 12.82 12.83 +0.00 +8.74 Debt Index Strip Spd Chg %Rtn Index Sov'gn Debt EMBI+ 278 -3 0.06 691.70

Currency percent change calculated from the daily U.S.

close at 2130 GMT.)) Keywords: MARKETS EMERGING

  Price   Change %Change
MSCI
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