EMERGING MARKETS-EM assets pause as Fed decision looms, geopolitics in focus

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Stocks up 0.04%, currencies 0.03% lower

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Data shows China exports topped forecast

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Border clashes hit Thai equities

By Niket Nishant

Dec 8 (Reuters) - Emerging market assets were flat on Monday following two days of gains, as investors held their moves ahead of the U.S. Federal Reserve's interest rate decision this week, digested upbeat data from China and weighed fresh geopolitical tensions.

MSCI's index of emerging market stocks was up 0.04%, while its currencies gauge inched 0.03% lower.

U.S. rate-cut expectations have boosted hopes for a strong rally in regional assets as they enter the final lap of a robust year. Lower rates tend to weaken the dollar, which reduces the cost of financing for emerging market companies and boosts demand for high-yielding regional currencies.

"It would be unlikely for emerging markets not to do well. Local market and equity valuations are still attractive... and technicals are favourable with long-term underinvestment," BofA analysts wrote.

However, with markets increasingly optimistic, any unexpected geopolitical flare-ups could weigh on sentiment.

A new round of clashes erupted between Thailand and Cambodia, months after U.S. President Donald Trump helped broker a ceasefire between the Southeast Asian neighbours.

Thai equities fell 1%, while the Thai baht was flat after gaining in the previous session.

In Benin, international bonds fell, according to Tradeweb data, after an attempted coup in the West African nation the previous day.

TARIFFS REMAIN ON RADAR

Though U.S. tariff fears have largely been eclipsed by Fed-related headlines in recent sessions, data shows that a shift in the global trade landscape may already be underway.

Customs data on Monday showed that China's exports topped forecasts in November, driven by a surge in shipments to non-U.S. markets as manufacturers deepen trade ties with the rest of the world.

"The frontloading effect as U.S. importers ramped up purchases ahead of tariffs will act as a headwind on trade in the coming months," economists at ING wrote in a note.

Chinese stocks advanced, with the benchmark Shanghai Composite Index rising 0.5% and the blue-chip CSI 300 Index edging 0.8% higher.

Banking and insurance stocks in the world's second-largest economy also jumped, after a top regulator said it will allow major financial firms to relax capital requirements and leverage limits to work more efficiently.

Meanwhile, Turkish stocks rose 1.4%. Foreign Minister Hakan Fidan told Reuters on Saturday that he expected Ankara and Washington would "very soon" find a way to lift U.S. sanctions imposed on Turkey in 2020 over its acquisition of Russian S-400 air defence systems.

Elsewhere, Poland's stock index was up 0.1% and Czech stocks fell 0.2%.

Czech working-day-adjusted industrial output rose by 1.1% year-on-year in October, after a revised 0.8% rise in September, statistics office data showed, suggesting modest momentum in the industrial sector.

The Czech crown and the Polish zloty were slightly weaker against the euro.

Hungary's Budapest index was 0.5% lower, while the forint fell 0.7%, on pace for its worst day in nearly two months if current levels hold.

Fitch Ratings cut Hungary's credit rating outlook to 'negative' on Friday, citing a worse trajectory for public finances amid fiscal loosening in the run-up to a 2026 national election and the risk of more measures to come. (Reporting by Niket Nishant in Bengaluru; Editing by Harikrishnan Nair)