* Turkish stocks hit record high, debt spreads tighten
* Emerging stocks steady after Bernanke, before stress tests
* Dubai 5-year CDS dip as Dubai World meets all lenders
By Carolyn Cohn
LONDON, July 22 (Reuters) - Turkish stocks hit record highs
on Thursday on optimism about second-quarter earnings but most
emerging equity investors remained cautious due to increased
concerns about the U.S. economy.
Comments by the Federal Reserve chief Ben Bernanke on the
uncertain outlook for the world's largest economy prompted
investors to avoid adding to risky positions, with one eye also
on European banks' stress tests, due to be published on Friday
But strong local demand and a dovish interest rate outlook
boosted Turkish assets.
"The significant Turkish recovery is mainly driven by rising
domestic demand -- private consumption is now back
to pre-crisis levels," said Lars Christensen, chief emerging
markets analyst at Danske in Copenhagen.
"The overall worry in the markets remains the fear of the
global recovery losing momentum. It is still too early to say we
will have a global double dip, but the markets are surely
fearing that, that is putting pressure on risky assets."
Turkish stocks <> rose above 60,000 for the first
time, Turkish local bond yields traded at 9-month lows, external
debt spreads tightened 9 basis points over U.S. Treasuries and
the lira rose towards the previous session's two-month high.
The MSCI emerging stocks index <.MSCIEF> dipped 0.05 percent
but the Thomson Reuters emerging Europe index <.TRXFLDEEPU>
gained 0.62 percent.
Emerging sovereign debt spreads <11EMJ> narrowed by 4 basis
points to 305 bps over U.S. Treasuries.
Central banks in emerging economies are seen taking a softer
approach to monetary policy than previously expected. Brazil on
Wednesday raised rates by a less-than-expected 50 basis points.
Some analysts forecast South Africa's bank will cut again on
Thursday to prop up the struggling economy. [].
South African benchmark bonds rose to the highest since
February but the rand held within recent ranges. South African
president Jacob Zuma said the rand's strength was "occupying the
mind" of the government.
STRESSES
"We are more or less rangebound in currencies but we may see
more action tomorrow with the stress tests," said Nigel Rendell,
emerging markets strategist at RBC.
The European Union is examining whether some banks need to
raise capital as it looks to dispel concerns about weakness in
the sector and repair an interbank lending market still closed
to some lenders.
Results of the stress tests, which will assess how banks
would fare if economic conditions worsened, are due on 91 banks.
Many European banks have subsidiaries in emerging Europe.
Hungary's forint rose 0.75 percent <EURHUF=> and has
recovered much of the ground lost earlier this week after the
suspension of international aid talks.
The Hungarian parliament is expected to vote on Thursday on
a key budget bill that includes measures like a special tax on
banks and a salary cap imposed on public institutions, including
the central bank.
The Czech crown hit a fresh three-month high <EURCZK=>, with
the Czech Republic considered one of the strongest emerging
European economies.
Meanwhile in Dubai, five-year credit default swaps eased to
480 bps from 482 bps closing levels, according to Markit, as
debt-laden state-owned conglomerate Dubai World met lenders over
its restructuring deal.
The terms were the same as those already agreed by core
banks, bankers at the talks said, and Dubai World said no
resolution was sought at the meeting. A successful restructuring
is likely to pave the way for gains in Dubai and Gulf markets,
analysts say.
(Additional reporting by Eunice Ng and Sujata Rao; editing
by Patrick Graham)
