EMERGING MARKETS-Stocks march toward best year since 2017

By Niket Nishant

Dec 29 (Reuters) - Emerging market stocks rose at the start of the final week of 2025, boosted by strength across Asia, even as end-of-year holidays reduced liquidity and slowed global trade.

The asset class is set for its best year since 2017, with few catalysts expected this week to stall its momentum.

However, investors are weighing conflicting factors for next year, including whether policy support can boost local demand in China.

Nerves are also frayed by the prolonged diplomatic effort that has yet to produce a Russia-Ukraine ceasefire.

MSCI's equities index for emerging markets .MSCIEF rose 0.4% on Monday and is on track to end the year with nearly 30% in gains.

A HIGH BAR SET FOR 2026

"Looking ahead, the performance obviously sets a very high bar to replicate," said Kamakshya Trivedi, chief foreign exchange and emerging markets strategist at Goldman Sachs.

"But some of the tailwinds present in 2025 are going to repeat in 2026, so we still expect good returns after a great 2025."

The yuan CNY= slipped slightly against the dollar, and was set for a second straight session of losses after state-run media warned against rapid gains in the currency.

Chinese stocks were mixed, with the Shanghai Composite index .SSEC on track for its longest winning streak since September last year, while the blue-chip CSI300 index .CSI300 fell 0.4%.

The finance ministry said on Sunday that fiscal policies will be more proactive in 2026.

Taiwan's equities benchmark .TWII rose 0.9% and hit a record high, defying concerns sparked by Chinese live-fire drills around the island.

South Korean stocks .KS11 also gained 2.2%, scaling levels last seen in early November. The won KRW=KFTC rose 0.7% against the dollar, extending a recent run.

The MSCI's regional currency gauge .MIEM00000CUS inched 0.1% higher.

SOUTH AFRICAN STOCKS, CURRENCIES PAUSE RALLY

South African shares .JALSH dipped 0.1% after a rally of 3.7% over the last six sessions. The rand ZAR=D3 also softened 0.3% against the dollar, as the prices of major exports, such as gold and platinum eased.

Shares of Aspen Pharmacare APNJ.J climbed 22% and touched their highest in over four months after the company said it will sell its major Asia Pacific assets, excluding those in China, to Australian private equity firm BGH Capital for A$2.37 billion ($1.59 billion).

Equities .XU100 were flat in Turkey, where data due next week is expected to show the annual inflation rate dipped in December, according to a Reuters poll.

Investors are also tracking geopolitical developments heading into next year.

U.S. President Donald Trump said on Sunday that he and Ukrainian President Volodymyr Zelenskiy were "getting a lot closer" to an agreement to end the war in Ukraine, while acknowledging that a few "thorny issues" around territory must be resolved.

Most of Ukraine's dollar bonds traded slightly higher.