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EMERGING MARKETS-Stocks eye record quarter, rand at 10-mth high
* Stocks eye record quarter, rand at pre-Lehman high
* Czech crown at year's high vs euro, forint at 5-mth high
* Turkish stocks test year's highs, lira rises on IMF hopes
By Carolyn Cohn
LONDON, June 30 - Emerging stocks headed towards a record strong quarterly rise on Tuesday, as investors have used the green shoots argument to launch into risky assets, and the rand hit its highest since before the collapse of Lehman Brothers.
Falling global interest rates and quantitative easing measures, help for emerging economies from the International Monetary Fund and a near-$600 billion domestic stimulus package for China have helped bring about some economic recovery and boost sentiment, after emerging stocks suffered their worst year on record in 2008.
"We've had such a good run in the last few months that it would be foolish to be greedy...on the valuations front, emerging currencies, equities and bonds no longer look cheap," said Nigel Rendell, emerging markets strategist at RBC.
"It's difficult to be optimistic that the rally can continue without a pause or consolidation."
The MSCI world equity index <.MSCIEF> edged up 0.14 percent on the day and is up 34 percent on the quarter and 35 percent on the year.
However, fund manager ING Investment Management said it was cutting its emerging equities position to neutral from overweight, as valuations are getting more expensive. [ID:nLU641098]
Emerging sovereign debt spreads <11EMJ> inched out by 1 basis point to 447 bps over U.S. Treasuries, in the middle of recent ranges.
The commodity-focused rand, which often leads the way in emerging currency moves, hit its highest against the dollar <ZAR=> since late August, prior to the mid-September collapse of Lehman Brothers which sent markets into a tailspin.
Most other emerging stock markets and currencies are still struggling to regain those pre-Lehman highs.
Turkish stocks <.XU100> tested 2009 highs and the lira rallied more than half a percent <TRY=>, helped by hopes of a Turkish deal with the International Monetary Fund.
Russian stocks <.IRTS> rose 2.92 percent after a quarter-end surge in oil <CLc1> to $73 a barrel. Russian stocks have climbed 55 percent this year, after plunging 72 percent last year.
Emerging European currencies rallied.
The Czech crown, considered one of the safer bets in emerging Europe, hit the year's highs against the euro <EURCZK=>.
The high-yielding Hungarian forint rallied more than 1 percent from the U.S. close to a five-month high of 272.29 <EURHUF=>, helped by a sharp fall in the country's current account deficit and the passing of a 2010 tax law.
"In the near term, the forint seems to benefit from a hawkish central bank backdrop and improving external balances," said Unicredit analysts in a client note, adding the bank was short euro/forint and targeting 265.
The Romanian leu was steady <EURRON=> after the central bank cut rates by 50 bps to 9.0 percent.
Credit default swaps, used to insure against restructuring or default of debt, fell.
Five-year CDS for Hungary fell to a mid-price of 355 bps from 362 bps at the U.S. close and Russia fell to 334.5 bps from 341.2, according to CDS monitor CMA DataVision.
CDS prices for Latvia, which appears to be avoiding a currency crisis with the promise of another tranche of rescue funds from the European Commission, have fallen to 684 bps from recent levels above 700.
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