EMERGING MARKETS-EM assets gain ground as new coronavirus cases drop

* New coronavirus cases in China fall for second day

* Turkish central bank’s interest rate decision awaited

* South Africa’s rand firms following inflation data

By Shreyashi Sanyal

Feb 19 (Reuters) – Emerging market assets regained footing on Wednesday, as worries about the spread of the coronavirus eased after the rate of new infections slowed and as investors took comfort from China’s efforts to contain the epidemic’s economic impact.

Chinese authorities reported the lowest daily rise in cases since Jan. 29 on Wednesday, helping ease concerns about the rising financial impact of the outbreak after Apple Inc and HSBC said the epidemic was damaging their businesses.

Investors were also optimistic about a raft of measures Chinese policymakers have implemented to support their economy in the face of the coronavirus epidemic, which is expected to take a heavy toll on first-quarter growth.

“Equities have remained relatively sanguine as the government is making efforts to mitigate the impact of the containment measures on businesses,” said Bas van Geffen, quantitative analyst at Rabobank.

MSCI’s index of emerging market stocks gained 0.5% after posting its worst fall this month on Tuesday.

Even as the decline in new cases offered some relief, analysts were wary of the rising risks to global economic growth from the outbreak.

“The global economic outlook remains mired in uncertainty at this point in time, with coronavirus-related warnings emanating out of Apple and corporate America, the eurozone economy and Asian government,” said Han Tan, market analyst at FXTM.

Among currencies, Turkey’s lira weakened against the dollar ahead of an interest rate decision by the country’s central bank. Traders expect the policy rate to be cut by 50 basis points to 10.75%.

“A larger 75bp cut would not surprise us either; at this stage, the step size in any given month matters less for the FX market because market participants anyway anticipate that rates will be cut to single-digit by the end of H1 2020,” Commerzbank analysts wrote in a note.

South Africa’s rand firmed after data showed inflation quickened to 4.5% in January from 4.0% in December, broadly in line with expectations.

The currency of Africa’s most industrialized economy has taken a hit from a stronger dollar and pessimism over the country’s growth outlook.

Russia’s rouble also strengthened in tandem improving global risk sentiment, while currencies in Poland and Hungary gained slightly against the euro.

For GRAPHIC on emerging market FX performance in 2020, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see tmsnrt.rs/2OusNdX

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For RUSSIAN market report, see (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Aditya Soni)

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