* Emerging shares hit new 2-1/2 year after positive PMI
* Polish zloty steady after pension plan but bonds pressured
* Turkish markets up after inflation data; lira recovers
By Sebastian Tong
LONDON, Jan 4 (Reuters) - Emerging stocks hit fresh 2-1/2
year highs on Tuesday, lifted by signs that the pace of the
global economic recovery would quicken in the new year.
Poland's recently announced pension system overhaul had
little impact on its currency though its external bonds came
under selling pressure while Turkish markets rose a day after
milder than anticipated inflation data strengthened the argument
for a further rate cut.
Risk appetite rose after PMI data out of the U.S. and Europe
showed December factory production accelerating while growth in
Indian and Chinese manufacturing showed a slowdown to more
sustainable levels. []
A slide in Chinese money market rates after a liquidity
crunch last month also pointed to easing investor concern over
Beijing's drive to rein in asset prices. []
"We have started 2011 on a reasonably firm footing. Recent
economic data from the major markets has been holding up well,"
said Manik Narain, emerging currencies strategist at UBS.
"Today we saw a 200 basis point drop in the Chinese repo
rate, partly reflecting some sharper upmoves into the year-end,
but it also suggests the markets are not overly concerned about
aggressive monetary tightening."
By 1215 GMT, emerging stocks <.MSCIEF> were 0.3 percent
higher in their sixth straight session of gains while emerging
sovereign debt <11EMJ> narrowed 8 basis points to 233 bps, their
tightest over U.S. Treasuries in three weeks.
The Thomson Reuters emerging European equity index
<.TRXFLDEEPU> firmed 0.3 percent. Romanian <> and Polish
equities <> hovered at their highest levels in around eight
months while Hungarian shares <> rose to four-week highs.
Strong commodity prices kept South African shares <.JTOPI>
at 2-1/2 year peaks.
Russian markets were closed for a holiday.
Turkish shares <> drifted up to four-week highs, a day
after a reading of December consumer price index (CPI) showed
inflationary pressures falling.
The central bank further heightened expectations that it
would further lower interest rates after saying that inflation
would continue to fall in the coming months, pushing Turkish
bond yields <0#TRTSYSUM=IS> towards record lows. []
Turkey is expected to issue a long bond amounting to $1-2
billion this week. []
TURKEY, POLAND
The lira steadied after Monday's 1.2 percent tumble, firming
half a percentage point against the dollar <TRY=>.
Many emerging currencies stayed aloft at recent highs.
South Africa's rand <ZAR=> backed off from three-year highs
reached against the dollar on Friday while Israel's shekel <ILS=>
touched fresh two-year highs to the greenback.
The Czech crown <EURCZK=> rose 0.5 percent versus the euro
to a four-week high while Hungary's forint saw its biggest one
day gain in 2-1/2 weeks <EURHUF=>.
Romania's leu edged higher, trading below the 3-1/2 month
peak it reached against the euro on Friday <EURRON=>.
Poland's zloty held steady at six-week highs against the
euro <EURPLN=> but its euro-denominated bond maturing in 2022
<PL028270151=> came under selling pressure.
Warsaw last week unveiled plans to reduce the country's
private pension contributions, a move criticised by some
analysts as a substitute for more radical fiscal reforms.
Though echoing Hungary's seizure of private pension assets,
Polish changes are not as far reaching. []
Their impact on the Polish currency are likely to be neutral
as non-local currency assets represent only 0.7 percent of the
total portfolio of private pension funds, argues UniCredit
analyst Gyula Toth.
Non-resident investors have also become the dominant buyers
of new Polish debt issuance, meaning that the fallout from the
diminished participation of private Polish pension funds will
not be immediate, he argued in a client note.
"Overall as the pension fund decision might conserve
Poland's heavy reliance on non-resident bond inflows and as the
government might try to increase eurobond issuance to take
advantage of low offshore borrowing costs and to avoid crowding
out the domestic private sector, we maintain our cautious view
on Polish external credit," he said.
(Additional reporting by Carolyn Cohn; Editing by Ruth
Pitchford)
