LONDON: Emerging stocks fell from a five-month high on Monday, as uncertainty over a bailout for debt-stricken Greece dented appetite for most risky assets, while political unrest in Russia and Romania triggered a rise in debt insurance costs.
The MSCI emerging equities index fell 0.5 percent, ending a four-day winning streak, as an extension to Greece's debt talks fanned fears of a messy default.
Emerging stocks rose over 3 percent last week to post gains of over 14 percent rise since the start of 2012 as upbeat factory data and signs of strong recovery in the US jobs market boosted optimism over the outlook for global growth.
"There's two cross currents in the markets. On the one hand there is continued uncertainty around developments in Europe over whether Greece will be able to secure a new funding deal... On the other hand we have more positive forces such as the good news on most leading indicators," said Manik Narain, emerging markets strategist at UBS.
"These two forces are doing battle with each other and the extension of the deadline for Greece has prompted investors to take some profits off what has been a very strong six weeks in emerging markets."
Hungarian stocks inched up 0.2 percent, having touched a six-month high earlier in the session, while Polish shares were little changed, hovering near three-month highs, and Turkish stocks edged down 0.2 percent, remaining close to 4-1/2-month peaks.
In the Middle East, Saudi shares eased from 12-month peaks, while the Egyptian bourse was dragged down by Egypt's biggest investment bank, EFG-Hermes. Shares in EFG plunged 5.7 percent after its chief executive was banned from leaving the country
Egyptian stocks jumped 28 percent in January after shedding 50 percent in 2011 amid political turmoil.
Emerging sovereign debt spreads widened one basis point to 345 bps over US Treasuries, trading around the lowest since mid-November.
Political unrest drove up the price of central and east European debt, with the cost of insuring Russia's debt against default rising 8 basis points to 223 in the five-year credit default swap market according to Markit. Romanian CDS rose 9 basis points to 380 bps.
Romania's Prime Minister Emil Boc resigned following weeks of nationwide protests against austerity measures, but the move had limited impact on the leu that edged some 0.1 percent lower against the euro. The International Monetary Fund said the political upheaval should have no effect on its aid deal with the Central European country.
The Bucharest stock market fell over 2 percent at one point before clawing back some losses.
Russia's rouble was little changed against a basket of currencies and stocks were flat, despite mass demonstrations on Saturday by both opponents and supporters of Prime Minister Vladimir Putin, a month before March 4 presidential elections.
"In Russia, the weekend protests did not change anything despite dictating headlines around the world. If anything, investor fears about the risk of instability will have eased further as numbers at the anti-government rally did not grow from the previous event," said Chris Weafer, an analyst at Troika Dialog said in a note.
The Hungarian forint fell 0.6 percent against the euro, while the Polish zloty was down 0.1 percent. Both currencies remain near multimonth highs.
The Turkish lira fell 0.7 percent from a five-month high, with investors taking the chance to cash in on a 9-percent gain so far this year.
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