EMERGING MARKETS-Stocks at seven-month low as AI-led rout hits Asian tech; CEE assets weaken

By Sudeshna Ghoshal and Ragini Mathur

Nov 6 (Reuters) - A gauge tracking emerging-market equities fell to a roughly seven-month low on Friday, as a tech selloff weighed on Asian shares, while Central and Eastern European markets also declined as investors assessed regional economic data and monetary policy signals.

The MSCI gauge was down 2.7%, touching its lowest level since April and heading for a sixth straight weekly decline.

The technology-led rout, which began on Wall Street, spread across Asia on renewed concerns that the AI-driven market rally may be losing momentum.

South Korea's KOSPI .KS11 hit its lowest intraday level since February and closed about 6% lower, while Taiwan's benchmark .TWII was on track for its worst weekly performance since 2001. China's blue-chip CSI 300 .CSI300 lost 1.4%.

Global markets have swung sharply this week as investors weighed the implications of Democratic gains in US midterm elections, including pressure for an end to the war in Iran and a tougher political backdrop for AI data-centre expansion.

Crude prices were nevertheless headed for a steep weekly decline, offering some relief to oil-importing emerging economies.O/R

"The fact that Donald Trump has lost control of the Senate means he is now going to be left with foreign policy to play with, and that's not necessarily a great thing from a geopolitical-risk perspective," said Nick Rees, head of macro research at Monex.

"Emerging markets specifically are somewhat more vulnerable as a group to geopolitical risk-off, although there is great differentiation within that."

MSCI's emerging-market currency index .MILA00000CUS was muted, but it was on track for a second consecutive weekly loss.

Safe-haven demand supported the dollar ahead of a closely watched US payrolls report. Lower Treasury yields, however, limited the greenback's gains.

Emerging European assets were also under pressure. Currencies in the region weakened against the euro, led by the Hungarian forint , while Budapest stocks .BUX fell 1.1%.

The Czech koruna was little changed, while Prague stocks .PX slipped 0.3%, extending losses after the Czech National Bank raised its main interest rate for the second time this year on Thursday to curb inflation pressures from strong domestic demand and higher energy prices.

Earlier this week, Poland's central bank kept its rates unchanged at 3.75%, as expected, despite raising its inflation forecast for 2027.

Regional data, however, pointed to resilient underlying activity. Czech adjusted industrial output rose 6.2% year-on-year in September, while Hungary's calendar-adjusted retail sales increased 4.3%, accelerating from a 2.4% gain in August.

Fund-flow data added to the cautious tone, with BofA Global Research reporting a $6.1 billion outflow from emerging-market debt funds in the week to November 4, the largest withdrawal since July and the sixth biggest on record.

India stood out as a bright spot. The Nifty 50 .NSEI and Sensex .BSESN each rose more than 1%, supported by sustained foreign buying and the market's relatively limited exposure to AI-linked stocks.

The rupee strengthened beyond 94 per dollar after spending much of the year under pressure.

Foreign investors bought a net $1.6 billion in Indian equities on Thursday, their biggest daily purchase in nearly six years, as lower oil prices and a rotation away from AI-related shares improved the appeal of Asia's third-largest economy.

In South Africa, the rand weakened 0.2% against the firmer dollar and the main equity index .JTOPI edged 0.2% lower. Vote counting continued after this week's municipal elections, with early results indicating further erosion in support for the ruling African National Congress.

HIGHLIGHTS:

** Chinese firms' profit margins trail global peers as domestic demand stays weak

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