* EM stocks bounce 0.3 pct as Treasury selloff eases
* U.S. growth hopes boost export-oriented markets
* Central Europe flat after GDP data
* EM fixed income investors wary
By Sujata Rao
LONDON, Dec 9 (Reuters) - A pause in the U.S. Treasury
selloff gave respite to emerging assets on Thursday with stocks
bouncing and hopes for a stronger U.S. economy next year
boosting export-oriented markets.
The selloff on Wednesday was triggered by a U.S. Treasury
yield surge of over 20 bps, after a deal to extend tax cuts
stoked fears of inflation and a swelling budget deficit. But
hopes the cuts will boost growth is broadly supportive for
commodity and other exports from the developing world.
That pushed up emerging stocks <.MSCIEF> 0.3 percent by 1210
GMT after they fell 1.3 percent in the previous session. The
market trimmed gains, however, after Fitch cut Ireland's credit
rating to two notches above junk.
Analysts say the rise in Treasuries is making the
environment more challenging for emerging markets, while thinner
pre-Christmas liquidity is also starting to exaggerate moves.
Investors are also wary ahead of a Chinese inflation release on
Saturday, fearing more policy tightening ahead.
"It's all exogenous. What people are watching are the U.S.
Treasury moves," said Michael Ganske, head of emerging markets
research at Commerzbank. "From a relative perspective
longer-term Treasuries are becoming more attractive ... emerging
fixed income will not perform if Treasuries are selling off."
"What is helping are the data releases from the U.S. showing
stronger growth and in euroland, Germany is in a good position.
So it's an interesting environment for emerging markets but not
a bull market," Ganske added.
Investors are increasingly focusing on markets that are
poised to gain from a pickup in U.S. growth. A $1 rise in oil
prices helped the Moscow market up half a percent <> while
in Asia, Korean and Taiwanese shares <> <.TS11> soared to
2-1/2 and three-year highs respectively.
But India fell 2 percent <> despite a rally in
export-driven outsourcing firms which get about half their
revenue from the United States.
Central European stocks were slightly higher <.TRXFLDEEPU>
after in-line economic growth data. The region is benefiting
from strength in Germany, the main investor in the region and
destination for most of its exports.
Czech stocks <> outperformed, jumping to a five-week high
as the export-heavy economy expanded by 2.8 percent in the third
quarter on an annual basis. But Polish stocks slipped off
2-1/2-year highs and Hungary was flat <> <>.
Hungary's economy expanded 1.7 percent year-on-year.
Earlier, Poland had shown 4.2 percent annual growth in the
previous quarter.
Central European currencies slipped however, after initially
trading firmer, as the Irish downgrade hit the euro.
The Czech crown weakened 0.4 percent <EURCZK=>. Data showed
November inflation in line with central bank targets, implying
the bank will not be in a hurry to raise interest rates.
But BNP Paribas analysts wrote: "We don't suppose that the
currency will be substantially affected by the CPI release and
we still prefer to sell euro-crown above 25.00."
On bond markets, emerging sovereign dollar debt, traded as a
spread product to Treasuries, has tightened spreads by 50 bps
since the start of December, outperforming Treasuries.
The indices tightened two bps more on Thursday to 273 bps
<11EMJ> <11EML>. But investors are likely to be cautious.
Commerzbank's Ganske said investors who are unable to hedge via
credit default swaps will not withstand more significant
Treasury losses.
ING Bank analysts agreed, noting that Turkish and Indonesian
debt looks most vulnerable.
"We are wary that the sell-off in Treasuries could spill
over to a sell-off in EM debt -- the simple argument being that
if the risk-free U.S. rate has risen, does EM debt offer a
sufficient risk premium?" they told clients.
(Editing by Ruth Pitchford)
