Stocks struggle over China growth concerns; Hungary rate decision eyed (Oct. 25)



(Corrects Liang's designation in paragraph 10)

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Most Asian stocks fall on policy concerns in China

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Shares elsewhere climb

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Chinese yuan weakens further, offshore at record low

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Hungary's forint flat; rate seen held at 13%

By Susan Mathew

Oct 25 (Reuters) - Emerging market stayed at 2-1/2-year lows on Tuesday as Asian shares continued to struggle over policy worries under Xi Jinping's third presidential term, while Hungary's forint looked to a central bank policy decision due later in the day.

The broader emerging market currencies index .MIEM00000CUS was at near 2-1/2-year lows as the Chinese yuan CNY= was at January 2008 lows against the dollar. The offshore yuan CNH= slipped further into record low territory.

China stocks, which plunged on Monday on worries that Xi's appointment of loyalists to his leadership team could mean prioritising the state over growth, were flat to lower.

"Further growth in China cannot be based on foreign trade, but rather on deepening its domestic market. The key question is whether the political regime facilitates this. It seems legitimate to harbour some doubts in this regard," said economists Bruno Cavalier and Fabien Bossy at ODDO BHF.

"With the evaporation of the booster effect of unbridled residential construction, China's growth regime has structurally declined... economic policy has the leeway to steer the slowdown, but not to vigorously boost demand."

Asian shares, which depend on robust growth in the world's second largest economy, were mostly in the red, led by a 1.5% slide in Taiwan shares .TWII .

But MSCI's index of emerging market stocks .MSCIEF , which is heavily weighted towards China, fell 0.7% before trading flat thanks to gains elsewhere. Turkish XU100 , South African .JTOPI and central European shares .WIG .BUX gained between 0.3% and 1%, taking heart from a stronger open in Europe.

London's FTSE .FTSE underperformed as HSBC HSBA.L dragged on a drop in quarterly profit, and as optimism following Rishi Sunak's victory in UK's prime ministerial race faded. HSBC's Hong Kong shares 0005.HK slumped 5%.

Risk assets have tumbled this year as worries about China's growth and aggressive monetary policy tightening by major central banks, notably the U.S. Federal Reserve, diverted funds towards safer assets such as the dollar =USD .

"Right now, we're not going all in in EM precisely because the Fed is still hiking," Jonathan Liang, head of investment specialists, Asia ex-Japan, Global Fixed Income, Currency & Commodities (GFICC) group, JPMorgan Asset Management, told the Reuters Global Markets Forum.

"The FX part is still an area of concern for us. The key would be, at what point does the Fed stop hiking, and when does the market gain confidence that we're getting there."

Hungary's forint EURHUF= was flat after sliding 1.4% for its worst session in a month on Monday. The central bank is seen holding the base rate at 13% after a string of tightening moves last week to rein in the forint from record lows.

For GRAPHIC on emerging market FX performance in 2022, see Link For GRAPHIC on MSCI emerging index performance in 2022, see Link

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 and Divya Chowdhury in Mumbai; Editing by Shailesh Kuber

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