* Emerging stocks dip from June 2008 highs, China tightens
* Hungary stocks drop over 2 pct on prolonged crisis taxes
* Polish zloty eyes six-month high against soft euro
By Carolyn Cohn
LONDON, Nov 10 (Reuters) - Emerging stocks dipped from
recent 2-1/2 year highs on Wednesday as China's central bank
tightened policy, and Hungarian stocks slid over 2 percent on an
extended timeframe for crisis taxes.
China raised reserve requirements by 0.5 percentage points
to mop up some of the cash that is streaming into the country
and posing a growing inflationary threat.
Investor flight to emerging markets due to quantitative
easing by the U.S. is causing inflationary pressures there and
is a focus for G20 leaders meeting in Seoul this week.
"The market is attuned to the fact that Beijing was likely
to act sooner rather than later as inflationary pressures are
stronger than expected, it's not positive but not sufficient to
derail emerging markets," said Manik Narain, emerging FX
strategist at UBS.
"Investors are keeping a close eye on the tone of the G20
meetings as there is a risk of protectionism gaining traction.
We need to see a broad consensus reached on the need to avoid
competitive devaluations."
The MSCI emerging equities index <.MSCIEF> fell 0.3 percent,
easing from recent June 2008 highs, and the Thomson Reuters
emerging Europe index <.TRXFLDEEPU> fell 0.64 percent.
Emerging sovereign debt spreads edged in by 1 basis point to
231 bps <11EMJ> over U.S. Treasuries.
Hungarian stocks <> slumped 2.5 percent to six-week
lows, suffering after the head of Hungary's independent Budget
Council said new taxes imposed on Hungarian banks, energy,
retail and telecoms firms could stay in place until 2014 instead
of 2012.
The prime minister's spokesman said later the "crisis taxes"
would expire after 2012 but the government wants to agree on new
rules with affected sectors that would bring in more budget
revenues in future.[]
"The (Hungarian) public consolidation process moves forward
but the corporate sector needs to carry more of the costs," said
Arvid Bohm, emerging equities strategist at SEB in Stockholm.
Euro zone debt worries have kept the euro under pressure in
recent days, with Ireland particularly in focus due to the high
price tag for bailing out its banks.
However, most emerging European countries are seen as
relatively immune, because of their comparably modest levels of
debt.
The Romanian leu <EURRON=> rose to one-week highs against
the weaker euro, and the Polish zloty <EURPLN=> tested six-month
highs.
Poland's central bank should soon start a cycle of monetary
tightening, a member of the central bank's Monetary Policy
Council was quoted as saying this week, proposing a series of 25
basis-point hikes. []
The strength of the Polish economy and general demand for
emerging markets have prompted gains in the currency, currently
at 3.89.
"We reiterate our view that euro/zloty will break its
current trading range and reach the 3.85/86 area before
year-end," said SocGen analysts in a client note.
The Ukrainian hryvnia <UAH=> gapped higher after Prime
Minister Mykola Azarov said inflation will not exceed 10 percent
this year, from 12.3 percent in 2009, and said the cabinet and
the IMF had no disagreements over the draft tax code likely to
be introduced this month.
(Additional reporting by Michel Rose, Sujata Rao and
Sebastian Tong; Editing by Ruth Pitchford)
