EMERGING MARKETS-EM assets subdued with Nvidia earnings in focus; Hungary extends rate pause

By Nikhil Sharma

Nov 19 (Reuters) - Emerging market assets were subdued on Wednesday as investors turned cautious ahead of Nvidia's quarterly earnings, which could shape the future of the AI-driven market rally, while Hungary extended the pause on its benchmark interest rate.

A broader gauge of emerging market stocks .MSCIEF slipped 0.14%, after dropping about 1.9% in the previous session - its worst day since April 7 - on mounting concerns over the valuations of tech and AI-related stocks and the spending pouring into the sector.

At the heart of the AI mania is Nvidia NVDA.O, the world's most valuable chipmaker, which faces a high bar for earnings since even mild underperformance could trigger significant volatility. The stock was up 0.4% in premarket trading ahead of results scheduled for release after Wednesday's market close.

MSCI's index for EM currencies .MIEM00000CUS was flat after modest losses in the previous session.

"Many investors see those earnings as a major test for the AI trade that has been so popular. So definitely those earnings
will set the tone for the markets," said Piotr Matys, senior FX analyst at In Touch Capital Markets.

In Central-Eastern Europe, Hungary's central bank left its base rate steady at the European Union's joint-highest level of 6.5% on Tuesday, noting fiscal loosening and an uncertain inflation outlook after next year's parliamentary election.

"The central bank commented on expansionary fiscal policy, which is a major factor for the central bank to maintain tight monetary policy. So essentially the overall message from the central bank was hawkish," In Touch Capital Markets' Piotr added.

Last week, the government raised its budget deficit targets to 5% for this year and next to support higher pre-election spending, which the bank said would make cutting the public debt-to-GDP ratio harder.

The Hungarian forint EURHUF=, which fell last week after the deficit target hike, was down 0.4% on Wednesday after two straight days of gains. However, the currency has had a strong run in 2025, advancing 6.7% year-to-date, supported by a higher interest rate differential that has bolstered carry inflows.

Budapest stocks .BUX rose 0.33%, taking its year-to-date gains to 34.1%. This stellar run has also been observed in broader emerging markets, reflecting investors' shift to markets that are seen as undervalued, and offer cheaper valuations and higher yields.

The Czech koruna EURCZK= was flat, while Prague's main stock index .PX added 0.1% after steep losses in the previous two sessions. The country's central bank on Tuesday acknowledged that monetary conditions were slightly restrictive, providing room to react to risks in either direction.

The Polish zloty EURPLN= slipped 0.16%, while Warsaw's benchmark index .WIG20 added 0.1% after four days of declines.

The bank left rates unchanged for the fourth successive meeting earlier this month, citing inflation risks from wage growth and potential government spending with the arrival of a new government led by protectionist prime minister hopeful Andrej Babis.

Elsewhere, geopolitical tensions escalated after Ukraine said 10 people were killed in a heavy overnight Russian missile and drone attack that struck a residential tower block in the western Ukrainian city of Ternopil.

Ukraine's international bonds were mixed. The country is also in political turmoil over a corruption scandal, with one of its main opposition parties physically blocking lawmakers in parliament from voting to dismiss two ministers under investigation.

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