LONDON: Turkish assets remained under pressure on Thursday as a dispute with Russia over its downed jet rumbled on, but other emerging equities edged up, snapping a three-day losing streak.
Turkish stocks fell 0.4 percent, hovering near the six-week lows hit the previous day, and the lira weakened 0.4 percent against the dollar as tensions remained high in the wake of Turkey's downing of a Russian warplane on Tuesday.
Russia has said it will keep flying missions near Turkish airspace and has already begun targeting Turkey's economy by strengthening control over its food and agricultural imports from the country.
Analysts at ING said the economic backlash might also extend to Russia reviewing its natural gas sales to Turkey and an assessment of Moscow's role in building Turkey's first nuclear reactor. This could add to pressure on the lira.
"Even though the external rate environment is not too difficult at present, one should expect further under-performance of the TRY," they added.
Russian shares gained around 0.2 percent but the rouble softened slightly against the dollar, tracking Brent crude oil futures lower.
Investors also remained concerned about Turkey's plans for an executive presidency, although Deputy Prime Minister Mehmet Simsek dismissed worries over central bank independence.
"What has created a bit of volatility is maybe some changing in the wording of the government programme with regards to the central bank mandate that has triggered that question mark in the market," said Murat Toprak, EM strategist at HSBC.
"These sort of questions linger for a long time in the market."
The benchmark emerging equity index rose 0.29 percent after three days of losses, helped by a rally of over 1 percent in Korea and a flurry of gains across stock markets in Poland, Hungary and Romania.
But currencies mainly weakened against the dollar which scaled an eight-and-a-half month high overnight following better-than-expected U.S. durable goods and jobless claims data.
This reinforced the view that the U.S. Federal Reserve will raise interest rates in December, creating a stronger headwind for emerging markets. Commodity producers are already struggling.
The South African rand weakened 0.67 percent against the dollar after dipping to a one-week low earlier.
The Zambian kwacha strengthened about 0.5 percent against the dollar as copper prices recovered and shrugging off a sharp rise in inflation to 19.5 percent year-on-year in November.
The World Bank said on Thursday it expected Zambia's economy, beset by weak copper prices and electricity shortages, to grow less than 4 percent in 2016.
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