LONDON, Nov 3 (Reuters) - Emerging market equities rose for a third day on Tuesday, tracking global market gains, but Turkish assets slipped after the ruling party won a decisive election victory, helping stocks and the lira post their biggest daily gains in years on Monday.
MSCI's benchmark emerging equity index was up 0.6 percent, with Hong Kong shares up 1 percent. Wall Street gained on Monday when surveys showed global manufacturing growth at seven-month highs in October, fuelling hopes the world economy was turning a corner.
UBS Wealth Management said it was closing its underweight position in emerging equities, although it remains wary.
"While we think it is too early to call for a turnaround as (corporate) earnings are still falling, the attractive valuations combined with the recent tentative stabilization in the region's economic data could lead to a further improvement in sentiment towards EM equities," the company said.
Cristian Maggio, head of EM strategy at TD Securities, said markets were supported by expectations of more quantitative easing from the European Central Bank and fewer concerns about China. But he warned that the rebound was fragile.
"I don't see anything particularly significant at this stage that justifies the extension of the rally," he said.
Turkey's post-election rally stalled, with stocks down 0.8 percent and the lira weakening 0.6 percent against the dollar.
Equities had rallied over 5 percent on Monday and the lira made its biggest one-day gain since 2008, after elections delivered an outright victory for President Tayyip Erdogan's AKP, ending months of uncertainty.
"The market was surprised by the result, so there was a strong knee-jerk reaction yesterday, but it has adjusted for the surprise now," Maggio said.
The result was "short-term positive for assets" but "long-term negative for the economy", he said, referring to worries about reform, security and central bank independence.
Underscoring the problems besetting the economy, Turkey consumer prices jumped 1.55 percent in October, outstripping forecasts.
Capital Economics forecast headline inflation above 9 percent in the first quarter of 2016, far above the central bank's 5 percent target.
South African stocks held steady after telecoms group MTN said Nigeria had renewed its operating licence after imposing a $5.2 billion fine. MTN shares rose 0.5 percent while the rand slipped 0.4 percent.
The Hungarian forint slipped 0.2 percent against the euro to near one-month lows after newspapers reported the central bank would provide an extra 600 billion forints in cheap loans, extending a funding scheme into 2016.
The Polish zloty firmed 0.2 percent before a central bank decision on interest rates on Wednesday. The currency has retreated from nine-month lows set before October elections that handed victory to the euro-sceptic Law and Justice party.
Meanwhile, dealers reported that Serbia's central bank was buying euros to try and stem gains in the dinar. The dinar was up 0.33 percent against the euro near two-week highs.
Earlier in Asia, the Korean won rose 0.4 percent against the dollar as data showed inflation at 11-month highs, potentially ruling out rate cuts in the short term..
For GRAPHIC on emerging market FX performance 2015, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2015, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2015, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2015, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see ) (Editing by Larry King)