LONDON, March 5 (Reuters) - Worries about a U.S.-led global trade war sent emerging market shares to their lowest in more than three weeks on Monday and hit a number of major currencies, including Mexico's peso, South Africa's rand and Turkey's lira.
Central and eastern European markets resisted the slide, on relief Germany was set to end more than five months without a government.
But declines in Asia, including a 2.3 percent drop in Hong Kong, kept MSCI's 24-country MSCIEF index down 0.65 percent and heading for a fifth straight losing day. The index is now 8 percent below a three-year high it reached in late January.
"The February shock (to global markets) was very good for EM - it went down much less than you'd expect and bounced sharply afterwards, but that was because it was not an EM-centric shock," said Salman Ahmed, chief investment strategist at Lombard Odier.
"Now with potential shock of trade wars, the major vulnerability is in the EM space."
The resistance from markets like Poland, the Czech Republic, Hungary and Romania also came despite U.S. President Donald Trump's threatening to impose tariffs on European carmakers .
"If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S.," Trump wrote on Twitter. "They make it impossible for our cars (and more) to sell there. Big trade imbalance!"
According to national and industry data, car manufacturing accounts for around 7 to 7.5 percent of gross domestic product in the Czech Republic and Hungary, just under 4 percent in Poland and around 13 percent in Romania.
Nevertheless, Warsaw, Prague, Budapest and Bucharest stock markets were up 0.2 to 0.8 percent.
In Turkey, the lira dropped against the dollar after inflation data came in stronger than expected, before the country's central bank meets on Wednesday.
The lira struggled in October and November when inflation was rising, putting the central bank back in conflict with government officials, who want to keep interest rates low to help growth.
"We have had higher-than-expected inflation this morning, so though they will keep rates on hold on Wednesday, they will have to accompany it with a very hawkish message," Rabobank strategist Piotr Matys said. "We still expect a hike at some point this year."
Mexican markets were bracing for the final day of the latest round of NAFTA trade talks.
There were reassuring noises from the world's biggest emerging market, China. It aims to expand its economy by around 6.5 percent this year - unchanged from 2017 - while pressing ahead with its campaign to reduce risks in the financial system, Premier Li Keqiang said in Beijing.
In an annual report, Li also said China has cut its budget deficit target for the first time since 2012, suggesting Beijing will be more careful about spending, while not tapping the brakes so hard that it risks a sharper slowdown.
In the spot market, the onshore yuan was trading around 6.3415 to the dollar. It had opened at 6.3284.
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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