* U.S. Fed delivered emergency 50 bp rate cut on Tuesday
* EM stocks rise 0.7%, currencies firm against battered dollar
* Poland cenbank decision awaited; rates expected to be held
By Susan Mathew
March 4 (Reuters) - Emerging markets stocks rose on Wednesday as markets welcomed a surprise interest rate cut by the U.S. Federal Reserve, but the urgency of the decrease raised fears about the extent of the damage to the global economy from the coronavirus outbreak.
MSCI’s index of emerging market stocks was up 0.7% as most Asian bourses gained, with heavily weighted Chinese shares closing up 0.6%.
Stocks in Turkey, South Africa and Hungary , which surged on Tuesday immediately after the Fed’s move, were again slightly higher on Wednesday.
A basket of emerging market currencies firmed 0.3% as the dollar eased after the additional liquidity measures.
China’s yuan jumped half a percent, while Indonesia’s rupiah rallied more than 1%. After wobbling in early trade, Turkey’s lira, South Africa’s rand and the Russian rouble were well in the black.
“There is some return of risk appetite,” said Cristian Maggio, head of emerging markets strategy at TD Securities.
“As long as markets think that policy makers are being pre-emptive, you may see, if not a bullish response, at least an interruption of the fall we’ve been seeing.”
Worries over the virus, which has now infected over 90,000 people, had wiped out more than $6 trillion from global equity markets last week, raising hopes of monetary and fiscal stimulus from the world’s biggest economies.
But the Fed’s 50 basis point rate cut on Tuesday, its first emergency move since the 2008 financial crisis, raised concerns about the extent of the economic fallout. Dismal data from China has also shown the strain on the global supply chain.
The South African rand had eased early on Tuesday after local GDP data showed the economy slipping into a recession in the fourth quarter of 2019.
All eyes are now on Moody’s review of Africa’s most industrialised economy, scheduled for end-March, where it could strip the country of its last investment grade credit rating and spark a massive outflow from its debt.
Turkey’s lira climbed 0.5%. Recent data has shown improving economic fundamentals, but gains in the currency have been capped by intensifying tensions with Russia about Syria’s disputed Idlib region.
Poland’s zloty firmed 0.2% against a steady euro, with investors eyeing the central bank’s interest rate decision later in the day.
The bank is expected to hold rates, but analysts are watching for the direction of a revision to macroeconomic forecasts. For GRAPHIC on emerging market FX performance 2020, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance 2020, see tmsnrt.rs/2OusNdX
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