EMERGING MARKETS-EM stocks march toward best year since 2017 on soft inflation, policy support

By Niket Nishant

Dec 23 (Reuters) - Emerging market stocks drew fresh investor interest on Tuesday, boosted by mild inflation and encouraging policy signals in local economies that pushed the asset class closer to its best year since 2017.

Singapore's stock benchmark .STI hit a record high after the core inflation reading for November came in cooler than expected.

In China, a readout of a housing policy conference showed that Beijing planned to intensify efforts to stabilise its ailing property market in 2026.

The blue-chip CSI300 index .CSI300 rose 0.2%. The real estate index .CSI000952, however, slipped 0.3%.

State-owned property developer China Vanke 000002.SZ fell 2.8% and hit its lowest in two weeks after its bondholders rejected a proposal to delay repayment of a bond by a year.

INVESTORS LOOKING FOR OPTIONS

Still, the MSCI index of emerging market equities .MSCIEF rose 0.2%, while the corresponding currency gauge .MIEM00000CUS was steady.

The equity index has gained 29% so far this year, as of Monday's close, putting it on course for its best year since 2017, when it jumped 34.3%.

Supportive local policy signals have become increasingly important at a time when emerging markets are regaining appeal among investors looking for options outside the United States.

With the Federal Reserve's interest rate cuts next year potentially weakening the U.S. dollar, global flows may be directed towards emerging markets, provided there are no unexpected shocks, analysts have said.

Third-quarter U.S. GDP figures due later in the day could also offer fresh clues on the Fed's policy path.

POLISH RATE OUTLOOK INTACT

In Europe, the Polish zloty EURPLN= was unchanged against the euro, a day after November retail sales data came in slightly below estimates.

Analysts expect the data to have little impact on interest rate expectations.

"November's lacklustre data does not undermine the solid momentum of Poland's economy. In 2026, we expect some improvement in industry and construction along with solid growth in fixed investment," said Adam Antoniak, senior economist for Poland at ING.

Separately, Poland's armed forces said they had deployed aircraft early on Tuesday to ensure the safety of the country's airspace after Russia launched airstrikes targeting western Ukraine near the border with Poland.

Polish equities .WIG were unfazed, rising 0.2% en route to their fifth straight day of gains.

BAHT EXTENDS SURGE

The Thai baht THB=TH rose 0.2% against the dollar and was hovering at its strongest levels since mid-2021, complicating the central bank's task as it tries to slow the currency's advance.

Bank of Thailand Governor Vitai Ratanakorn said policymakers were hopeful the baht's momentum could be eased by measures on gold trading, and there were no plans to take any drastic steps against capital movement.

A surge in the value of a currency can make exports costlier, prompting customers to hunt for alternatives, and can also make the country a less appealing destination for foreign tourists.

In Lebanon, most dollar-denominated bonds were trading lower, according to Tradeweb data.

On Monday, Prime Minister Nawaf Salam urged the cabinet to swiftly approve a draft law allowing depositors to gradually recover funds frozen in the banking system since a financial collapse in 2019, a move critical to reviving the economy.