EMERGING MARKETS-Stocks resume rally, for strongest week since 2011

By Claire Milhench

LONDON, Oct (HKSE: 3366-OL.HK - news) 9 (Reuters) - Emerging market stocks rose on Friday and were headed for their strongest week since December 2011 as signs the United states would delay raising interest rates led investors back to higher-yield emerging market assets.

Minutes from the Federal Reserve's last meeting indicated it won't rush to tighten policy when global economic growth appears to be slowing. As a result, investors who pulled billions of dollars from emerging market assets in August and September have started to return.

"As soon as the message from the Fed turned more dovish, investors didn't want to be holding unproductive, low-yielding assets for six months or more," said Christian Maggio, head of emerging markets strategy at TD Securities. "That's why money is coming back to emerging markets."

MSCI (NYSE: MSCI - news) 's benchmark emerging equity index rose 1 percent to the highest since mid-August and is up 6.6 percent so far this week, the most in four years.

Emerging market currencies that sold off earlier this year also gained against the dollar. The Indonesian rupiah had its best week in more than 14 years, up almost 9 percent.

The Malaysian ringgit rose to near a two-month high, up about 7 percent on the week, its best performance since authorities pegged the currency in 1998.

After a four-day rally on higher oil prices, the Russian rouble was headed for its best week of the year, up just under 7 percent against the dollar.

The South African rand hovered around a three-week high, on course for its best week since mid-March, up around 3 percent. Johannesburg stocks were at 4 1/2-month highs, up 4.3 percent on the week, thanks to commodity price gains.

"These currencies sold off aggressively, but there is a limit to everything," said Maggio. "The market overshot, and when risk appetite started to come back, that was the trigger for a massive reversal of those positions."

Chinese mainland shares were up 1.3 percent . Indonesian stocks were set to post their best week since April (LSE: 0N69.L - news) 2009.

In central Europe, Hungarian 10-year bond yields were around six-month lows, after inflation data hinted at more policy easing and minutes from the European Central Bank expressed concern about slower growth.

However, emerging equity funds tracked by EPFR Global posted their 13th consecutive outflow in the past week, suggesting investors still have some doubts. The outflows were the smallest since July, though.

Barclays (LSE: BARC.L - news) said the adjustment was an opportunity to reinstate short positions on emerging market currencies.

"We expect the dollar to rally broadly over the coming months, which will act as a strong headwind to EM currencies," Barclays said, and outflows were likely to resume.

For GRAPHIC on emerging market FX performance 2015, see http://link.reuters.com/jus35t

For GRAPHIC on MSCI emerging index performance 2015, see http://link.reuters.com/weh36s

For GRAPHIC on MSCI emerging Europe performance 2015, see http://link.reuters.com/jun28s

For GRAPHIC on MSCI frontier index performance 2015, see http://link.reuters.com/zyh97s

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see ) (Editing by Larry King)