* Emerging equities, bonds weaken in cautious markets
* Czech crown hits 5-mth highs vs euro, soars vs zloty
* Turkish assets dip, no IMF deal yet
* Latvia has market holiday, investors remain nervous
By Carolyn Cohn
LONDON, June 22 (Reuters) - Emerging sovereign debt spreads
widened and stocks fell on Monday in a continuation of recent
worries about risky assets, while the low-yielding Czech crown
benefited from risk aversion.
Emerging assets have enjoyed a steep rally since March on
renewed optimism about the global economy, but that rally
started to falter last week.
The Czech crown and Hungarian forint gained ground ahead of
rate decisions this week, while the Polish zloty fell.
"The Czech crown is traditionally the currency that
outperforms in the region on risk aversion," said Juliet
Sampson, chief EMEA economist at HSBC.
"Hungary has very, very strong interest rate support."
Benchmark emerging equities fell 0.48 percent to 746.85
<.MSCIEF> after falling 5 percent last week, but remain 32
percent higher for the year.
Emerging sovereign debt spreads widened by 9 basis points to
449 bps over U.S. Treasuries <11EMJ>.
The Czech crown hit 5-1/2 month highs against the euro
<EURCZK=> and multi-year highs against the zloty <PLNCZK=R>,
boosted by relatively strong domestic fundamentals and a break
of key technical levels.
The Hungarian forint also hit 3-1/2 year highs against the
zloty <PLNHUF=R>.
Hungary is expected to keep rates on hold at 9.5 percent on
Monday, while rate cuts are seen in Poland, by a quarter point
to 3.5 percent, and the Czech Republic, by a quarter point to
1.25 percent.
The Turkish lira was slightly softer against the dollar
<TRY=> and Turkish stocks steadied <> as markets hesitated
in their view that an IMF deal was imminent.
Turkish stocks rose last week on talk of an impending deal,
which markets have been awaiting since the last deal expired
over a year ago.
The cost of protecting Turkish debt from default via 5-year
credit default swaps has been at levels similar to those seen
before the collapse of Lehman Brothers last September, although
CDS rose on Monday.
Turkey and the International Monetary Fund held very useful
talks on a lending agreement, the IMF's number 2 official John
Lipsky told reporters late on Friday.
Tim Ash, head of CEEMEA research at RBS, does not expect a
near-term deal:
"It is unlikely, markets depending, that Turkey would close
a deal with the IMF over the summer," he said in a client note.
"If a deal is to be done, it is most likely to be concluded
in September."
Latvian markets were closed for a holiday but investors
continue to focus on the likelihood of the release of the next
tranche of EU/IMF funds, following deep budget cuts last week.
Imminent speculation of a devaluation has receded following
the cuts, but analysts see it likely in the future.
CDS prices rose for countries considered at danger of a
contagion from a Latvian devaluation.
Romania's 5-year CDS rose to 402 bps from 377.6 bps at
Friday's close and Bulgaria climbed to 402 bps from 376,
according to CDS monitor CMA DataVision.
