EMERGING MARKETS-Shares flat as Hong Kong tensions offset reopening hopes

  • Reuters
  • Stock Market News
EMERGING MARKETS-Shares flat as Hong Kong tensions offset reopening hopes
Credit: © Reuters.

* China parliament approves Hong Kong security bill

* HK shares slip 0.7%; trade-sensitive S.Korea, Taiwan shares dip

* MSCI EM shares index flat as most other shares gain

* Central bank meeting in Poland eyed

By Susan Mathew

May 28 (Reuters) - Emerging market shares struggled for direction on Thursday as hopes for an economic recovery from pandemic-driven recessions were offset by growing U.S.-China tensions over Beijing's move to impose a new security law on Hong Kong.

Stocks in Turkey .XU100 , South Africa .JTOPI , Russia .IMOEX , Poland .WIG20 and Hungary .BUX rose between 0.7% and 2.6% on signs of a revival in activity across Europe and some parts of Asia. .EU

But the wider MSCI index of emerging market shares .MSCIEF traded flat, weighed down by losses for trade-sensitive South Korea .KS11 and Taiwan .TWII .

China's parliament overwhelmingly approved directly imposing a national security law on Hong Kong, threatening the global financial hub's special status under U.S. law and potentially eliciting a strong response from Washington against Beijing's move. expect China's move to have considerable implications for Hong Kong with the threat of higher tariffs, sanctions and tougher investment and visa rules between Hong Kong and the United States," said Benjamin Quinlan, managing partner at Quinlan & Associates.

The move also threatens to further dent economic activity even as the world reels from the impact of the COVID-19 pandemic, although a raft of central bank and government stimulus has so far helped put a floor under equity markets.

Stocks in Hong Kong .HSI slipped 0.7%, while bankers and industry sources said rich Chinese were likely to park less funds there on worries over the security law. China shares .SSEC .CSI300 closed up 0.3% before the congressional approval of the bill. The yuan CNY= traded 0.2% higher against a steady dollar. FRX/

Currencies of the developing world were also muted, with South Africa's rand ZAR= easing from a two-month high hit earlier in the session and Turkey's lira TRY= falling 0.2% against the greenback. Declining oil prices saw Russia's rouble RUB= trade flat. O/R

The Polish zloty EURPLN= firmed against the euro ahead of a central bank meeting later in the day, with policymakers expected to hold rates steady at 0.5%. The currency has outperformed its central European peers this month on hopes of a faster economic rebound on the continent.

"Things could change if the coronavirus lockdowns were to come back but for now, the (central bank) development has to be viewed as a hawkish surprise," said Tatha Ghose, an analyst with Commerzbank (DE: CBKG ).

For GRAPHIC on emerging market FX performance 2020, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance 2020, see https://tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

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