* Emerging shares wane on valuation fears
* Russian rouble down on weaker oil, falling forex reserves
* Baltic debt insurance costs slip on Lithuania Q2 revision
By Sebastian Tong
LONDON, Aug 27 (Reuters) - Emerging shares eased on Thursday
as wariness set in among investors about stretched valuations,
although positive euro zone and U.S. consumption indicators
helped to offset concern about the pace of Chinese economic
growth.
Russia's rouble sagged against its dollar-euro basket as oil
retreated towards $70 a barrel while the Hungarian and Polish
central banks left their doors open for further monetary easing,
keeping their currencies on the back foot.
Overnight falls in the Asian session set a more cautious
trading tone but data showing sales of new homes in the U.S.
hitting their highest levels in 10 months in July and
better-than-expected consumer confidence indicators provided
some support. []
Pronouncements on Wednesday by Chinese leaders that Beijing
would take steps to curb overcapacity in a range of industrial
sectors also renewed doubts whether China can pull the rest of
the world out of a downturn. []
The benchmark emerging stocks index <.MSCIEF>, which has
risen nearly 50 percent since the start of the year, fell for
the third straight session, slipping 0.5 percent by 1035 GMT.
"Market players are unwilling to push currencies or other
assets higher at present as valuations are rich, and going into
September there are possible risk events like the German
elections. People prefer to wait and see on the sidelines before
adding to positions," said Elisabeth Gruie, currency strategist
at BNP Paribas.
"We remain mindful of the tone to Chinese equities ... China
was the first one to sell off in the bear markets of past years
so ... the potential for contagion is high."
Most bourses in emerging Europe fared better than their
Asian peers, cheered by euro zone figures showing the currency
bloc's economy recovering at an accelerated clip.
The euro zone's leading economic index rose for the fourth
month running while German consumer sentiment rose to its
highest in 15 months. [] []
Romanian shares <> climbed to their highest level since
October last year while Polish <> and Czech shares <>
were up around 1 percent.
ISSUANCE
High-yield currencies were mixed although the rouble fell
0.4 percent against its dollar-euro basket as weakening oil
prices weighed on investor appetite for the Russian currency.
Figures showing a week-on-week drop in Russia's gold and
foreign exchange reserves, used to shore up the local currency,
also added to selling pressure. []
The Czech crown <EURCZK=> and Romania's leu <EURRON=> held
firm against the euro, bolstered by positive euro zone data, but
the Polish zloty <EURPLN=> and the Hungarian forint <EURHUF=>
softened against the common currency on heightened expectations
of further rate cuts.
A Polish central banker said more interest rate cuts could
be in the offing this year if inflation eases while the deputy
governor of Hungary's central bank said an improvement in the
country's risk assessment allowed for further easing of monetary
policy. [] []
According to CMA DataVision, five-year credit default swaps
(CDS) bought to insure against Lithuanian sovereign debt default
fell by 14 basis points while those for Estonia and Latvia fell
by 6 bps and 11 bps respectively.
Emerging sovereign debt spreads narrowed 1 basis point
<11EMJ>, supported by news that Brazil may earn a much-coveted
investment-grade rating from Moody's Investors Service in the
coming weeks. []
The environment for debt remains benign with South Africa
becoming the most recent among emerging sovereign borrowers to
return to the market.
South Africa added $500 million on Wednesday to a 2019 bond
launched in May. []
Romania has shortlisted 10 banks for a planned Eurobond bond
while Ukraine has said it wants to sell a foreign bond by the
end of the year.
(Additional reporting by Sujata Rao; editing by David Stamp)
