EMERGING MARKETS-China's power shortages curb stocks; Turkey-U.S. ties eyed

A drop in Chinese energy and metal companies hit by power shortages offset gains across emerging market stocks on Monday, while Turkey's lira came off all-time lows with eyes on frayed relations with the United States.

A drop in Chinese energy and metal companies hit by power shortages offset gains across emerging market stocks on Monday, while Turkey's lira came off all-time lows with eyes on frayed relations with the United States. Most EM bourses gained on hopes Beijing would step in to contain the fallout from debt-laden property developer China Evergrande. Its electric vehicle unit tumbled on Monday after it warned of its uncertain future.

An index of Asian shares excluding Japan rose 0.1%, while the main indexes in Russia <.IMOEX, South Africa, Poland, and Hungary rose between 0.1% and 0.9%. Russia's index was a hair's breadth away from record highs. But MSCI's index of EM stocks traded flat as China's energy and power-intensive sectors such as resources and non-ferrous metals dropped sharply. The Shanghai Composite index was down 0.8%.

Power shortages in China have intensified in recent weeks as ambitious new measures to rein in emissions kicked in. At least 15 listed Chinese firms flagged disruption to their production. China has asked coal and natural gas companies to increase their output to ensure the country has sufficient energy supplies to keep homes warm during winter.

This comes amid worries of slowing growth in the world's second-biggest economy. "Over the short term, China needs to find a balance between economic growth and its green targets," said Hao Zhou, a senior economist at Commerzbank.

"The official PMI manufacturing for September due this Thursday will provide a gauge on the economic health." While most EM currencies firmed against a slightly weaker dollar, South Africa's rand fell 0.6% ahead of a data-heavy week, while the Philippine peso hit 10-week lows on worries about the country's widening trade deficit.

Turkey's lira firmed 0.4% after three sessions of losses that sent it to all-time lows of 8.8995 to the dollar. An unexpected rate cut in a surging inflation environment knocked the country's assets last week. Over the weekend, President Tayyip Erdogan said Turkey still intended to buy a second batch of S-400 missile defense systems from Russia, a move that could deepen a rift with NATO ally Washington and trigger new U.S. sanctions.

The lira is the worst-performing EM currency so far this year, down bout 16%. On Friday, Belize said its outstanding dollar bonds due 2034 sailed through with 84% backing from bondholders.

In Poland, after hitting 5-1/2 month lows last week, the zloty jumped 0.3% against the euro. For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see https://tmsnrt.rs/2OusNdX

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