EMERGING MARKETS-EM stocks head for October gains despite end-of-month lull

By Niket Nishant

Oct 31 (Reuters) - Emerging market equities looked poised to end October higher even as moves in the final days of the month were subdued, while currencies remained stuck within a range despite long-term tailwinds.

MSCI's equities index for the region .MSCIEF fell 0.6% on Friday but was still on track for a monthly rise of 4.2%.

Hopes for a U.S.–China trade deal and Federal Reserve interest rate cuts had driven markets higher during the month before momentum stalled after the events fell short of expectations.

Fed Chair Jerome Powell signalled that another cut in December was not assured, while the U.S.–China trade talks delivered few big surprises.

"It's a very positive development that the two largest economies' leadership is speaking to each other," said Rohit Chopra, emerging-markets equity portfolio manager at Lazard Asset Management.

"The markets are waiting for tangible details. But investors at least have a better understanding of the situation that will help them make better capital expenditure decisions."

MSCI's regional currencies gauge .MIEM00000CUS was set to end the month little changed. Fed rate cuts, which typically dull the dollar's appeal, were expected to support emerging market currencies but have shown little benefit this month, while Powell's latest remarks have cooled sentiment.

REGIONAL MOVES UNEVEN

South Korean shares .KS11 marked their biggest monthly gains since January 2001, helped by the trade pact between Washington and Seoul. The won KRW= strengthened 0.2% against the dollar.

However, the currency could take a hit in the coming months as cash starts flowing out of the country to cover South Korea's investment commitments in the U.S., economists said.

In China, the Shanghai Composite Index .SSEC and the blue-chip CSI300 Index .CSI300 fell 0.8% and 1.5%, respectively, as investors booked profits following a strong rally.

Data released on Friday showed that China's factory activity shrank for a seventh month in October, dragged by a drop in new export orders.

In Hungary, Prime Minister Viktor Orban doubled down on his plans to boost pensions, stepping up his political campaign ahead of national elections in 2026. He also reiterated that he would seek a waiver from U.S. sanctions on Russian oil when he meets U.S. President Donald Trump.

The Budapest index .BUX was flat while the Hungarian forint EURHUF= weakened 0.3% versus the euro.

Saudi Arabia's benchmark stock index .TASI was down 0.8%, with oil prices heading for a third consecutive monthly decline.

The world's biggest oil exporter could reduce its December crude price for Asian buyers to multi-month lows due to ample supplies, sources told Reuters.

The kingdom's budget deficit widened in the third quarter as spending picked up and oil revenue growth was almost flat, finance ministry data showed on Thursday.

J.P. Morgan, meanwhile, raised its 2025 forecast for defaults on emerging-market high-yield corporate bonds, citing faster deterioration in the petrochemicals sector, particularly at Brazil's Braskem BRKM5.SA.