EMERGING MARKETS-Bulgaria stocks jump, Argentina eyed as EM defies H1 doubters
* EM stocks head for near 5 pct gain in H1 * Bulgarian bank shares jump after EU aid * Russia stocks, rouble slide ahead of ceasefire expiry * Offshore funds lift won, intervention caps gains By Marc Jones LONDON, June 30 (Reuters) - Emerging market stocks and many currencies were heading for their strongest first half in five years on Monday, defying the consensus call at the start of the year that U.S. stimulus cuts would deter buyers. MSCI's emerging market share index was up 0.45 percent and eyeing its highest level in over a year, while South Korea's won, at its strongest in nearly 6 years, led a pack of Asian currencies bucking calls for them to weaken. In Europe, Bulgarian bank stocks jumped sharply after the European Commission doused fears about their finances as it approved a $2 billion (3.3 billion lev) credit line. Shares in First Investment Bank rose by 25 percent, recouping almost all of the ground lost last week, though Bulgarians were still queuing outside local banks to withdraw their money. "We see a recovery of trust in the market. The pick-up in the share price of First Investment Bank reflects a necessary correction after last week's plunge and is also a result of the country's resolve to support the banking system," a trader with Sofia-based Karoll Brokerage told Reuters. Emerging market attention was also turning to a bond payment deadline in Argentina as it struggles to avoid a default on its previously restructured debt. Argentina has deposited the next payment into a holding account, but a U.S. federal court has ordered it can't go through until holdout bondholders are paid in full. Tensions between Ukraine and Russia also simmered as the expiry of a ceasefire between Ukraine government forces and pro-Russian separatists neared. Russia's rouble was down half a percent and Moscow stocks were down almost 1.5 percent with bonds weak too. Monday's ceasefire deadline comes in tandem with one set by EU leaders considering new sanctions against Russia. "There are still significant uncertainties about Russia/Ukraine," said Manik Narain, an emerging market strategist at UBS. "The ceasefire is due to end this evening and with renewed reports of violence over the weekend the threat of broader, sectoral sections on Russia still exists." ASIAN GAINS Indonesia's rupiah outperformed for the day on expectations that the country could return to a trade surplus in May. The dollar struggled to get off a one-month low against a basket of six major currencies as softer U.S. economic indicators cemented expectations that the Fed may not hurry to hike interest rates, driving more funds to Asia. However, some analysts doubted whether regional currencies would strengthen much further in the second half, given the risk that a stronger recovery in the world's top economy could prompt the U.S. central bank to tighten policy faster. Investors are awaiting June U.S. jobs data on Thursday, a day earlier than usual because of the July 4 public holiday. Analysts polled by Reuters on average expect a non-farm payrolls gain of 210,000 for June versus 217,000 in May. "Asian currencies are expensive now and the carry trade seems to be a bit exhausted. In late fourth quarter, the dollar/Asian FX could rise on the Fed's hawkish move," said Saktiandi Supaat, head of FX research at Maybank in Singapore. Most emerging Asian currencies have appreciated in the first half as investors sought higher yields in Asia while major central banks pumped out cheap money. The won has led the gains, with a 4.4 percent appreciation against the dollar so far in the first six months of the year. India's rupee has also risen 2.9 percent with the business-friendly Bharatiya Janata Party's election win, helping shake off last year's image as one of the "fragile five" emerging markets. "We find that a majority of investors argue that EM is better placed this year from a fundamental perspective," said UBS's Narain. "One of the things that makes us cautious though is that investors are no longer underweight in EM, so you don't have the same sort of positioning and technical support than you had six months back." Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg on year Morgan Stanley Emrg Mkt Indx 1050.82 +4.64 +0.44 +4.80 Czech Rep 1006.09 -1.86 -0.18 +1.72 Poland 2406.44 +6.81 +0.28 +0.23 Hungary 18592.97 -136.42 -0.73 +0.16 Romania 6946.13 +67.66 +0.98 +6.97 Greece 1208.34 -1.63 -0.13 +3.93 Russia 1361.03 -18.72 -1.36 -5.82 South Africa 45710.06 +58.21 +0.13 +10.19 Turkey 79040.12 +567.73 +0.72 +16.58 China 2048.33 +11.92 +0.59 -3.20 India 25413.78 +313.86 +1.25 +20.04 Currencies Latest Prev Local Local close currency currency % change % change in 2014 Czech Rep 27.43 27.43 -0.03 -0.37 Poland 4.16 4.15 -0.13 -0.20 Hungary 309.07 309.42 +0.11 -3.91 Romania 4.38 4.39 +0.10 +1.76 Serbia 115.71 115.69 -0.02 -1.05 Russia 33.94 33.75 -0.57 -3.10 Kazakhstan 183.53 183.38 -0.08 -15.93 Ukraine 11.72 11.72 +0.00 -29.78 South Africa 10.60 10.59 -0.15 -1.45 Kenya 87.60 87.30 -0.34 -1.60 Israel 3.44 3.42 -0.43 +0.84 Turkey 2.12 2.12 -0.11 +0.99 China 6.20 6.22 +0.23 -2.42 India 60.11 60.03 -0.13 +2.81 Brazil 2.19 2.19 +0.00 +7.68 Mexico 12.98 12.96 -0.19 +0.36 Debt Index Strip Spd Chg %Rtn Index Sov'gn Debt EMBIG 281 0 0.00 685.97 All data taken from Reuters at 1136 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT. (Additional reporting by Jongwoo Cheon in Singapore)
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