EMERGING MARKETS-EM stocks slip as traders await fresh signals on geopolitics, rate outlook

* Trump-Putin summit put on hold * FX flat; rupiah gains rates kept on hold * South Africa inflation rises to 3.4% y/y By Niket Nishant Oct 22 (Reuters) – Emerging market stocks fell on Wednesday as investors weighed lingering geopolitical tensions, while parsing local data and interest rate decisions for fresh cues. An MSCI index tracking emerging markets equities fell 0.31%, following a 1.26% jump in the previous two sessions. The currencies gauge was flat. Plans for a summit between U.S. President Donald Trump and Russian President Vladimir Putin, where the two were expected to discuss the war in Ukraine, were put on hold on Tuesday. Uncertainty also surrounded a possible meeting between Trump and his Chinese counterpart Xi Jinping. However, relatively attractive valuations and a steady demand for diversification has brightened the outlook for emerging markets, and may set the tone for the rest of the year despite a stalemate on the geopolitical front. Brief pullbacks, common before policy cues, could offer better entry points for investors on the sidelines. "We are optimistic about the fundamentals in emerging markets and believe others are starting to take notice of the asset class," analysts at J.P. Morgan Asset Management wrote in a note. "Emerging market FX is the way to diversify from the U.S. dollar. Even with the depreciation of the dollar so far this year, the U.S. currency is still significantly overvalued." The MSCI Emerging Markets index is up 28.65% this year as of last close, handily beating the S&P 500's 14.52% gain and the MSCI World Index's 17.09% jump. RAND SLIPS, RUPIAH SNAPS BACK Data released on Wednesday showed South Africa's headline consumer inflation rose to 3.4% year-on-year in September, up from August but lower than the 3.5% economists had forecast. The South African rand weakened 0.23% against the dollar, while equities crept 0.51% higher after a 2.18% drop on Tuesday. Indonesia's central bank unexpectedly held its key interest rate steady, surprising markets with a pause in its easing cycle after cutting rates at its past three meetings. The Indonesian rupiah gained ground against the dollar. The central bank has paused its easing cycle at some meetings over the past year due to weakness in the currency. The move could help preserve the rupiah's appeal as a carry trade favourite, especially as rate cuts by the U.S. Federal Reserve weaken the dollar. A carry trade involves borrowing in a low interest rate currency to invest in assets denominated in higher-yielding currencies. The Jakarta SE Composite index, however, fell 0.77% after two consecutive sessions of gains. Meanwhile, a report from Indian newspaper Mint said India and the U.S. were nearing a trade agreement that would reduce tariffs on Indian imports to a 15%-16% range, from 50% currently. (Reporting by Niket Nishant in Bengaluru; Editing by Rashmi Aich)

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