* Emerging equities follow Wall Street higher
* China growth at lowest in seven years
* Unrest in Iceland underscores wider risks
By Peter Apps
LONDON, Jan 22 (Reuters) - Emerging stocks rose on Thursday
following Wall Street, but sinking economic growth in China
pointed to a worsening picture across developing markets with
unrest in Iceland underscoring risks from the global crisis.
Benchmark emerging equities <.MSCIEF> rose 0.74 percent by
1130 GMT, off six-week lows, but remained down 8.47 percent this
year, adding to 2008's record losses.
Shares in the Czech Republic <> rose 0.2 percent, Turkish
stocks <> gained 1.55 percent and South African equities
<.JTOPI> were up 1.46 percent.
"We have a stronger equity picture today on the back of New
York yesterday -- which looked like a delayed response to the
Obama inauguration," said foreign exchange strategist Nigel
Rendell at Royal Bank of Canada. "But generally people are
waiting on the sidelines for the next big move."
There were additional signs of life in the Eurobond market,
which until recently had been moribund. Poland is planning to
issue a five-year euro-denominated benchmark bond, one of the
banks managing the deal said.
(For details please double click on [])
Benchmark emerging sovereign debt spreads <11EMJ> were 10
basis points narrower at 667 bps over U.S. Treasuries, another
sign of renewed -- if mild -- risk appetite. But nerves remain.
China's economic growth slowed to 6.8 percent last quarter,
dragging down the pace of expansion for all of 2008 to a
seven-year low of 9 percent as the global financial crisis dug
into what had been seen as one of the most durable emerging
economies [].
"Data from Asia in particular has been horrendous recently,"
said Rendell. "Governments and central banks all over the world
are now just cutting rates as hard as they can, ignoring
inflation and just letting currencies go where the market will
take them to protect growth."
Singapore became the latest country to announce it would tap
its reserves in a near US$14 billion package to help companies
and save jobs as it battles its worst ever recession
[].
Serbia cut interest rates more than expected on Thursday by
125 basis points to 16.5 percent amid a weakening economic
outlook. The Serbian dinar <EURRSD=>, which has lost 20 percent
since October, fell another 1 percent after the announcement.
[]
WORRIES OVER UNREST
Czech central bank vice governor Miroslav Singer told
Reuters late on Wednesday that interest rates could be cut again
next month as economic growth could grind to a halt this year,
but the weakening currency could limit the scope for more
easing.
Central bank governors from the Czech Republic, Poland and
Romania said they will be forced to lower growth forecasts,
while Hungary's central bank chief said its contraction would be
worse than previously forecast. []
Despite mounting scepticism, Poland's finance minister said
he remained determined to adopt the euro in 2012 despite a
possible delay in its entry to the pre-euro exchange rate
mechanism to the second half of this year [].
The Czech crown <EURCZK=> was 0.58 percent weaker against
the euro, while the Polish zloty <EURPLN=> was down 0.51
percent, the Hungarian forint <EURHUF=> down 0.61 percent and
Romania's leu <EURRON=> down 0.42 percent.
South Africa's rand <ZAR=>, the Israeli shekel <ILS=> and
Turkish lira <TRY=> were down 1.36, 1.22 and 0.19 percent
respectively against the dollar.
With demonstrations turning violent this month in Lithuania,
Latvia, China and Bulgaria, investors are becoming increasingly
nervous about the threat of social unrest. A political crisis in
Iceland, the first state victim of the crisis last year, was a
reminder of the risks.
Protests against the government and central bank have become
regular in Reykjavik since the currency and banking system
collapsed in October.
Demonstrators pelted the Prime Minister's limousine with
eggs and cans on Wednesday, with police using tear gas when a
demonstration outside parliament turned violent in the early
hours of Thursday [].
Iceland's devastated crown remains barely tradeable, with a
gulf remaining between the local rate <EURISK=> set by now
government-controlled banks of around 166 to the euro with an
offshore rate <EURISK=D3> of 210-215.
