EMERGING MARKETS-Emerging shares at 3-wk low; factory data highlights poor growth

By Sujata Rao

LONDON, May 3 (Reuters) - Emerging stocks slipped to three-week lows on Tuesday, weighed down by worries over economic growth, with shares in emerging markets-focused Aberdeen Asset Management (Other OTC: ABDNF - news) falling almost 8 percent after poor results.

Manufacturing activity across the developing world remains lacklustre, purchasing managers' indexes showed, with output in China slowing for the 14th straight month in April while activity in Brazil, in data released on Monday, was the weakest in seven years.

Many other countries also posted weaker numbers, with hitherto robust Poland showing an unexpected decline. Taiwan (Taiwan OTC: 6549.TWO - news) 's growth was worse than expected in the first quarter as exports slumped, data showed last Friday.

The data suggested the growth malaise in emerging markets is likely to continue weighing on emerging stocks. These enjoyed a 20 percent-plus trough-to-peak rebound this year but are now 3 percent off recent 4-1/2 month highs.

MSCI (NYSE: MSCI - news) 's index of emerging equities fell 0.8 percent . weighed down by 1 percent declines in Hong Kong and Taiwan . Turkish and South African shares also fell around 1 percent .

"I think this will be a pause or a short-term correction. Even (Taiwan OTC: 6436.TWO - news) though China is down slightly, it is still pointing to pretty decent second quarter growth," said Per Hammarlund, head of emerging markets at SEB (LSE: 0MGS.L - news) in Stockholm.

"The markets have got ahead of themselves a bit but I don't think we'll see a big correction - the underlying driving forces are still there."

He cited steady U.S (Other OTC: UBGXF - news) . growth, the likelihood of measured rate rises there and Chinese year-on-year growth of well over 6 percent, even if the latter is driven by a debt expansion.

But asset manager Aberdeen warned of more pain ahead, reporting a 40 percent drop in profits in the six months to end-March due to heavy fund outflows.

Most emerging currencies benefited from a half percent pullback in the dollar index and gains in the yen, with the lira trading just off six-month highs.

Turkish data showed monthly inflation slowing to 0.78 percent in April, below forecasts of 1 percent which, along with poor PMI data, solidified expectations of rate cuts.

"This will fuel expectations that the central bank will buckle under political pressure and cut rates faster," Hammarlund said.

Russian markets were closed but the rouble traded flat in offshore trade while 10-year bonds were bid marginally higher. Yields fell below 9 percent on Friday for the first time in two years as the central bank hinted interest rates could be cut from June.

Peter Kinsella, head of EM research at Commerzbank (Xetra: CBK100 - news) , noted Russian inflation had more than halved in the past year to 7 percent but given the 4 percent target, he expects the bank to stay cautious on policy easing.

"They want to slowly manage rates lower and my take is we can expect a rate cut as early as June, that's becoming increasingly likely. But the lion's share of the cuts will come in 2017 so the story will be of back-loaded rather than front-loaded cuts," Kinsella said.

For GRAPHIC on emerging market FX performance 2016, see http://link.reuters.com/jus35t

For GRAPHIC on MSCI emerging index performance 2016, see http://link.reuters.com/weh36s

For GRAPHIC on MSCI emerging Europe performance 2016, see http://link.reuters.com/jun28s

For GRAPHIC on MSCI frontier index performance 2016, see http://link.reuters.com/zyh97s

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see ) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley (Xetra: 885836 - news) Emrg Mkt Indx 828.60 -6.97 -0.83 +4.34

Czech Rep 904.20 -5.14 -0.57 -5.45

Poland 1899.72 +3.08 +0.16 +2.18

Hungary 26866.81 -2.20 -0.01 +12.32

Romania 6470.09 +22.10 +0.34 -7.63

Greece 583.65 -0.90 -0.15 -7.56

Russia 951.11 -13.30 -1.38 +25.64

South Africa 45979.00 -492.00 -1.06 +0.40

Turkey 82697.72 -1132.12 -1.35 +15.30

China 2993.20 +54.87 +1.87 -15.43

India 25302.15 -134.82 -0.53 -3.12

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2016

Czech Rep 27.04 27.02 -0.04 -0.14

Poland 4.38 4.38 +0.00 -2.78

Hungary 311.13 310.98 -0.05 +1.13

Romania 4.48 4.48 -0.04 +0.83

Serbia 122.40 122.39 -0.01 -0.76

Russia 65.14 65.17 +0.05 +11.99

Kazakhstan 328.00 327.20 -0.24 +3.81

Ukraine 25.00 25.00 +0.00 -4.19

South Africa 14.31 14.26 -0.36 +8.02

Kenya 101.05 101.00 -0.05 +1.14

Israel 3.73 3.75 +0.40 +4.12

Turkey 2.80 2.80 +0.07 +4.11

China 6.48 6.47 -0.03 +0.25

India 66.34 66.34 -0.01 -0.21

Brazil 3.50 3.50 -0.01 +13.10

Mexico 17.29 17.20 -0.52 -0.67

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 410 3 .01 7 18.68 1

(additional reporting by Claire Milhench)