EMERGING MARKETS-Emerging markets open April higher on Iran de-escalation hopes; Hungary vote in focus

By Pranav Kashyap

April 1 (Reuters) - Most emerging-market assets staged a broad rally on Wednesday, kicking off April on a strong note as hopes grew for de-escalation in the Iran war.

MSCI's EM stocks index .MSCIEF surged 4.4%, putting it on track for its strongest daily gain since November 2022. Asian equities, which carry significant weight in the index, led the charge.

South Korean equities .KS11 jumped nearly 9%, while stocks in Taipei .TWII and Islamabad .KSE climbed nearly 5% each. Shares in Singapore .STI, Hong Kong .HSI, Mumbai .BSESN, Budapest .BUX, Warsaw .WIG20, Johannesburg .JTOPI, Dubai .DFMGI and Prague .PX all rose by more than 2%.

U.S. President Donald Trump and Secretary of State Marco Rubio said the war in Iran could be nearing an end, with Washington signaling room for both direct talks with Tehran's leadership and a possible winding down of the conflict even without a formal deal.

That sparked a relief rally across virtually every corner of emerging markets. International dollar bonds issued by Pakistan gained close to five cents on the dollar, while debt issued by Egypt, Sri Lanka and Ukraine - among the hardest hit - also attracted strong demand.

Greek stocks .ATG, meanwhile, added nearly 1% after index provider MSCI said the country will return to its developed markets index in May 2027.

"Long-term investors should stay invested and positioned for medium-term upside, while continuing to take opportunities to diversify and hedge portfolios, and manage exposures to markets most at risk from elevated energy prices," said Mark Haefele, chief investment officer at UBS Global Wealth Management.

HUNGARIAN ELECTIONS

Hungary moves into the spotlight this month as it gears up for a parliamentary election on April 12, with Viktor Orban potentially facing the loss of power after 16 years. Hungary's centre-right Tisza party is currently leading in opinion polls.

Hungarian stocks .BUX have largely outperformed broader EM equities this year, as financial markets price in a vote that may usher in a more pro-European government - raising the prospect that Peter Magyar, if elected, could unlock billions of euros in EU funds frozen over concerns about democratic standards under Orban.

The forint EURHUF= has also outperformed most regional peers.

"We agree that an opposition Tisza victory would likely be forint-supportive," said Murat Toprak, CEEMEA FX strategist at HSBC.

Yet the currency is "still exposed to elevated energy prices."

Czech PMI manufacturing data marked its highest reading in nearly four years in March, while Polish factory output rose for the first time in a year, underscoring resilience despite risks stemming from the Middle East conflict.

Across the emerging-market landscape, however, countries are still grappling with the surge in energy prices, with governments from Thailand to India and Egypt taking steps to cushion the impact of costlier crude oil, which is stoking inflation fears worldwide.