* Emerging equities hit lowest level since August 2007
* Icelandic crown up after bank says debt covered for year
* South African rand supported by credit numbers
By Peter Apps
LONDON, July 29 (Reuters) - Emerging equities hit their
lowest level since August 2007 on Tuesday on the back of ongoing
problems in the Western financial sector, but the picture in
emerging currencies was more mixed.
Benchmark emerging equities <.MSCIEF> were down 1.47 percent
by 1030 GMT, having earlier hit 1006.65, their lowest in almost
a year.
Chinese stocks <> were down 1.82 percent, South African
<.JTOPI> stocks down 0.75 percent and Czech markets <> down
0.84 percent. Having briefly it raised the year's losses in
May, they are now down 19 percent this year.
U.S. bank Merrill Lynch <MER.N> said it would take a $5.7
billion write-down to offload toxic mortgage debt, while
regulators closed two regional U.S. banks, marking the sixth and
seventh bank failures this year as the sector wrestles with the
deepest housing crunch since the Great Depression.
"Obviously, there is a spill over in emerging equity
markets," said Dresdner Kleinwort foreign exchange strategist
Jon Harrison. "But the picture in currencies is more positive."
The troubled Icelandic crown <ISK=>, which has been pounded
by troubles in its heavy leverage the banking sector which has
left it particularly exposed to the global credit crunch, rose
1.5 percent against the euro and the dollar.
Local bank Landsbanki <LAIS.IC> said on Tuesday its
second-quarter net profit had fallen to $146 million, but its
chief executive said its debt repayments for the next 12 months
of around $1.34 billion were fully funded [].
"Obviously, that has been broadly supportive of the
currency," said Harrison. "But we have other bank results later
this week so we could see a lot more volatility."
With the dollar broadly weaker, the Turkish lira <TRY=> was
0.02 percent stronger despite a court case aimed at banning the
ruling party for alleged Islamist activities that started on
Monday as well as a lethal bombing in Istanbul over the weekend.
South Africa's rand <ZAR=> was 0.55 percent stronger ahead
of inflation data later in the week, supported by new credit
growth figures.
Growth in demand for credit by South Africa's private sector
quickened in the year to June, data showed on Tuesday,
undermining the case for interest rates to be left on hold
[].
But Central European currencies, which have been viewed in
recent months as emerging safe havens and have repeatedly
bounced off record highs as investors look at their expected
euro accession, were broadly weaker ahead of rate decisions this
week.
The Czech crown <EURCZK=> was 0.13 percent weaker, while the
Polish zloty <EURPLN=> was 0.31 percent down and the Romanian
leu <EURRON=> down 0.43 percent.
The Slovak crown <EURSKK=> was 0.02 percent stronger after
the central bank held rates as expected [].
Slovakia had been expected to keep borrowing costs level
with the euro zone ahead of joining the single currency next
year.
Romania's finance minister told Reuters in an interview he
expected inflation to fall to 4-5 percent next year from 8.6
percent in June, saying he would propose cutting 2009 public
wage growth to 4 percent. []
Emerging debt spreads <11EMJ> were one basis point narrower
at 284 above U.S. treasuries.
