EMERGING MARKETS-EM stocks rise, FX mixed as markets eye Trump's talks at UN

By Utkarsh Hathi

Sept 22 (Reuters) - Emerging market stocks rose to nearly a two-week high on Tuesday, supported by tech-heavy Asian bourses, while currencies were mixed as investors awaited signals from US President Donald Trump's meetings with global leaders on major conflicts.

MSCI's index tracking EM equities .MSCIEF gained 0.6%, lifted mainly by AI-linked heavyweights in Taiwan and South Korea as strong demand for Meta Platforms' Muse AI assistant boosted sentiment toward the sector.

South Korea's KOSPI .KS11 and Taiwan's tech-heavy benchmark .TWII rose 0.2% each.

MSCI's EM currency index .MIEM00000CUS edged 0.4% higher against the dollar. Asian currencies were flat to higher against the dollar, with the Korean won leading gains among peers, up 1.3%.

While AI-related stocks supported the equity benchmark, broader market sentiment remained cautious ahead of Trump's meetings with Gulf officials and Ukrainian President Volodymyr Zelenskiy, which could offer clues on the outlook for wars in the Middle East and Ukraine.

Investors are also digesting last week's US Federal Reserve rate hike and persistently high energy prices, both of which have kept major central banks on a hawkish path.

"We've come through the recent interest rate decisions and we're still not in earnings season. So we've got no real huge catalysts to move markets in the next month," said Michael Field, chief equity market strategist EMEA at Morningstar.

"The danger there is that any sort of macro event or announcement around the Iran war could move markets substantially."

Field added that investors in EM might be disappointed if they don't start thinking about an environment where interest rates are notably higher for quite some time.

In Central & Eastern Europe, attention is on the Hungarian central bank's inflation outlook, with the bank expected to keep rates unchanged later in the day after three consecutive rate cuts.

The Hungarian forint was flat against the euro while its regional peers were subdued. The currency has outperformed its regional peers despite Hungary's rate-cutting cycle, supported by still-elevated yields relative to Poland and continued investor demand for carry trades.

Polish retail sales came in lower than expected in August, and the pace of growth slowed compared to the previous month.

Turkish money market funds saw about $4 billion of outflows in the first two weeks of September, while lira bank deposits grew by $12 billion despite lower deposit rates, suggesting investors moved money directly from funds into local currency deposits, Goldman Sachs said.

The Turkish lira was muted, while its stocks .XU100 slipped 0.5%.

Hungary's benchmark stock index .BUX rose 0.4%, while the Polish .WIG and Romanian .BETI benchmarks were little changed.

In South Africa, the rand was subdued ahead of the inflation data and the central bank's rate decision later in the week. Its stocks .JTOPI gained 0.2%.

Elsewhere in Asia, rating agency Fitch lifted Sri Lanka's credit rating, pushing its government bonds to a record high. Bonds maturing in 2036 and 2038 rose almost 2 cents to all-time highs of around 103 cents on the dollar, Tradeweb data showed.

HIGHLIGHTS:

** South Korea confirms first project under $350 billion US investment pact despite viability concerns

** US stresses backing for Japan, Korea and Taiwan ahead of Trump-Xi summit

** Thailand's cabinet approves $1.29 billion consumer subsidy extension

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