LONDON, Feb 21 (Reuters) - Emerging equities soared almost 1 percent on Wednesday while South Africa's rand held steady as investors awaited Finance Minister Malusi Gigaba's first budget under new President Cyril Ramaphosa.
Risk appetite for emerging market assets was fairly robust, with MSCI's benchmark emerging stocks index lifted by strong gains in some Asian markets, still catching up after the Lunar New Year holidays.
Hong Kong shares rose 1.8 percent to a two-week high and index heavyweight Taiwan surged 2.8 percent in its biggest one-day gain since September 2016.
But the main focus was on South Africa, where investors are waiting to see if Gigaba will deliver sufficient tax hikes to help plug a revenue gap.
The rand was steady after three days of losses, having hit three-year highs since Ramaphosa was elected leader of the ruling ANC party late last year, so the risks are for some weakening if the budget is deemed a disappointment.
Jakob Christensen, head of emerging markets research at Danske Bank, said that with government debt at 55 percent of GDP, investors would be looking for deficit reduction measures.
"But it's very important that the new government that will be appointed under Ramaphosa implements structural reforms to raise the growth potential," he added. "That is as important or more important than the cost saving measures in the budget."
Investors are still awaiting details of Ramaphosa's new cabinet, with the president saying he will screen the lifestyles of future government officials. It is not yet clear if Gigaba will keep his job.
South Africa's 10-year local government bond yield was steady at a 2-1/2 year low while dollar bonds were little changed.
In Emerging Europe, Turkish stocks gained 1.7 percent, rebounding from Tuesday's 2.1 percent loss.
The Turkish lira also firmed 0.3 percent after ending Tuesday down 1 percent when pro-Syrian government forces entered Syria's northwestern Afrin region to help a Kurdish militia there fend off a Turkish assault.
"If the conflict worsens and Turkey and is more active we may see further weakening from here," said Christensen, adding that Turkey was one of the emerging economies that was more vulnerable to U.S. rate rises.
Another big Tuesday faller, India's rupee, touched a fresh three-month trough before firming a touch. The rupee has lost about 1 percent so far this week on concerns over the country's widening trade deficit and the implications of an alleged $1.8 billion fraud at Punjab National Bank.
The bank's shares were up 0.6 percent but have shed nearly 28 percent in the past week.
In debt markets, Indonesia's local currency bonds are to be added to the Bloomberg Barclays' Global Aggregate Index, which covers investment grade bonds, from June 1, 2018.
The yield on the benchmark 10-year government bond fell to 6.443 percent from 6.467 percent the previous day, while the rupiah gained as much as 0.3 percent. Index inclusion is expected to encourage further inflows from foreign investors.
For GRAPHIC on emerging market FX performance 2018, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2018, see http://tmsnrt.rs/2dZbdP5
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Equities Latest Net Chg % Chg % Chg
Emrg Mkt Indx 1206.08 +11.55 +0.97 +4.11 Czech Rep 1104.76 -1.38 -0.12 +2.47 Poland 2408.56 -4.67 -0.19 -2.14 Hungary 38692.91 +25.83 +0.07 -1.74 Romania 8304.47 -2.57 -0.03 +7.10 Greece 837.79 -4.04 -0.48 +4.41 Russia 1274.37 +9.69 +0.77 +10.39 South Africa 51107.88 +87.42 +0.17 -2.71 Turkey 15375.38 +1942.53 +1.71 +0.04 China 3199.48 +14.52 +0.46 -3.26 India 33813.54 +109.95 +0.33 -0.71 Currencies Latest Prev Local Local close currency currency
% change % change
Czech Rep 25.33 25.33 +0.00 +0.79
Poland 4.15 4.15 -0.13 +0.53
Hungary 312.04 311.73 -0.10 -0.48
Romania 4.66 4.66 -0.00 +0.41
Serbia 117.89 118.01 +0.10 +0.43
Russia 56.57 56.51 -0.11 +1.92
Kazakhstan 319.43 320.11 +0.21 +4.19
Ukraine 26.99 27.05 +0.22 +4.30
South Africa 11.73 11.73 -0.04 +5.35
Kenya 101.30 101.20 -0.10 +1.78
Israel 3.50 3.50 -0.04 -0.60
Turkey 3.79 3.80 +0.25 +0.05
China 6.34 6.34 +0.00 +2.56
India 64.79 64.85 +0.09 -1.48
Brazil 3.26 3.26 -0.00 +1.74
Mexico 18.73 18.71 -0.11 +4.93
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 309 0 .01 7 88.91 1
(Reporting by Claire Milhench; Editing by Raissa Kasolowsky)