* Irish bailout provides relief but gains tempered
* Polish zloty up after local polls, ahead of rate mtg
* Turkish lira, bonds rally after deficit figures
By Sebastian Tong
LONDON, Nov 22 (Reuters) - Emerging markets eked out modest
gains on Monday after Ireland's weekend move to seek a bailout
for its debt woes staunched some uncertainty over Europe's
financial stability.
The Polish zloty hit a week's high against the euro ahead of
a central bank interest rate meeting while Turkish bonds were
boosted by data showing a sharp drop in the country's budget
deficit.
News that Dublin had agreed to a three-year rescue package
from the European Union and the International Monetary Fund
lifted global markets as investors were relieved that fears over
the euro zone's most-debt ridden economies had been contained at
least for the moment. []
"There's a mood of cautious optimism. There's not a great
deal of talk about contagion spreading to Portugal as such but
I'm not expecting a great deal of positioning as we have the
upcoming Thanksgiving holidays in the U.S.," said Nigel Rendell,
emerging market strategist at RBC Capital Markets.
Slowing economic growth in Asia -- which has seen some of
the strongest emerging-market inflows -- helped temper gains
though as data showed Thailand slipped into a technical
recession in the third quarter. []
China's move on Friday to raise bank reserve requirements
for the second time in two weeks, aimed at fighting inflation,
also put pressure on emerging markets. []
"Emerging markets have had a good run and since we're headed
towards the end of the year, there will be people looking to
lock-in gains," said Rendell.
The benchmark emerging equities index <.MSCIEF> firmed 0.6
percent by 1220 GMT to its highest level in around a week while
emerging sovereign debt <11EMJ> narrowed three basis points to
244 bps over U.S. Treasuries.
Russian shares <> led gains, rising for the fourth
straight session while Romanian shares <> were the biggest
losers, shedding half a percentage point.
Fund manager Franklin Templeton has threatened legal action
against Romanian energy firm Romgaz amid accusations that the
government was moving to force the firm to make a donation
towards the budget deficit. []
ZLOTY UP
The zloty firmed to a week's high against the euro <EURPLN=>
ahead of a two-day central bank meeting beginning Tuesday.
Investors are revising expectations that the Polish central bank
will raise rates this week though the country is expected to be
the first in eastern Europe to tighten monetary policy.
[]
The zloty was also shored up following weekend municipal
elections in the country which consolidated popular support for
the ruling centre-right party.
"We see this as increasing the chances for strict fiscal
polices and more reforms to be implemented," said SEB in a
research note.
Also on steadier footing was the Hungarian forint, which was
up for a fourth consecutive session, hitting a two-week high
<EURHUF=>.
Political developments in Hungary continue to occupy
investors with indications that the ruling party may seek to cut
off funding for an independent budget watchdog proving
particularly worrisome. []
"So far, rating agencies have been very indulgent for the
government but we would not bet it will last forever and prefer
to avoid Hungarian assets," BNP Paribas said in a client note.
Israel's shekel was among the day's gainers, rising to near
two-week highs against the dollar <ILS=>. Israel's central bank
is widely expected to leave its benchmark interest rate at 2
percent on at a meeting on Monday but there is an outside chance
of a rate rise. []
Figures showing Turkey's budget deficit fell 24 percent in
October offered Turkish markets a fillip, sending the lira up to
its highest level to the dollar in over a week <TRY=> and the
benchmark 30-year bond <TRGLB30=RR> higher. []
(Reporting by Sebastian Tong; Editing by Susan Fenton)
