May 21, 2020 / 8:56 AM / 10 days ago

EMERGING MARKETS-Shares tread water with stimulus, central bank meetings in focus

* China stimulus hopes rise as parliament meets

* Interest rate cuts in Turkey, S.Africa expected

* Oil prices buoy Russian rouble

By Susan Mathew

May 21 (Reuters) - Emerging market shares trod water on Thursday as a rally on Wall Street looked set to fizzle out, with attention turning to a key policy gathering in China and central bank rate decisions from Turkey and South Africa.

Hong Kong and China mainland fell about 0.5% each ahead of a parliamentary session that could see more stimulus deployed across the world’s second largest economy.

South African shares broke a four-session winning streak, and most emerging central European bourses traded in the red as well. Wall Street futures also pointed to a weaker open.

However, a surprise pick-up in export orders in Taiwan and easing curbs on air and rail travel in India , along with gains in Turkish stocks saw the overall emerging markets stocks benchmark trade flat, near last session’s three-week highs.

“Risk is not firing on all cylinders this morning,” said Stephen Innes, Chief Global Markets Strategist at AxiCorp. He pointed to concerns about China’s trade relations with Australia and United States, and investors holding back in the event that Beijing disappoints on stimulus.

South Africa’s rand weakened 0.1% with expectations being for a 50-100 basis points cut in the key interest rate, currently at 4.25%.

That would see the benchmark sink to its lowest level in 50 years. The bigger focus will be on the bank’s government bond buying programme, with policymakers rejecting calls to play a more dominant role in backstopping Pretoria’s debt splurge to help finance a bulging deficit.

The Turkish counterpart is seen trimming rates by a modest 50 basis points to 8.25% in its ninth straight cut. The lira traded steady.

Russia's rouble firmed 0.3% against a stronger dollar thanks to higher oil prices. Credit Suisse analysts point also to reports that Russia could suspend its fiscal rule this year - one of the formulae used by the Bank of Russia to determine the level of foreign currency sales.

It sells foreign currency under the fiscal rule when prices for Urals - Russia’s blend of crude oil, fall below $42 per barrel, the threshold crossed in March.

The reported amendment to the rule should benefit the rouble as it “provides free protection from a decline in oil price and will allow the rouble to benefit fully from a recovery in oil prices. The amended fiscal rule also implies a more accommodative fiscal policy, although temporary,” wrote Credit Suisse’s Alexey Pogorelov.

For GRAPHIC on emerging market FX performance 2020, see For GRAPHIC on MSCI emerging index performance 2020, see

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru Editing by Mark Heinrich)

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