LONDON, Sept 26 | Thu Sep 26, 2013 6:17am EDT
LONDON, Sept 26 (Reuters) - Emerging stocks lost the last of their post-Fed gains on Thursday, hitting eight-day lows as attention switched to a battle over the U.S. budget, though South African stocks hit a record high for a second day.
Profit-taking in Chinese stocks ahead of the quarter-end and a week-long holiday that begins on Tuesday also dragged the broader emerging stock index lower.
The U.S. Congress, struggling to avert a government shutdown next week, was warned by the Obama administration on Wednesday that the Treasury was quickly running out of funds to pay government bills and could soon face a damaging debt default.
The MSCI emerging equities index dipped 0.2 percent and has fallen nearly two percent from four-month highs hit last week after the Federal Reserve maintained its bond-buying programme, a boon for risky assets.
South African stocks hit a record high, however, with recent rand weakness helping commodity firms which receive revenues in dollars.
Emerging sovereign debt spreads widened by 3 basis points to 342 bps over U.S. Treasuries, and emerging European currencies were generally softer.
Ukrainian debt insurance costs remained at elevated levels above 1,000 bps in the 5-year credit default swap market, according to Markit, a threshold that indicates distressed debt, following a rating downgrade by Moody's last week.
One-year CDS were even higher at a closing price above 1,200 bps, reflecting strong expectations of a restructuring or default by Ukraine in the next year.
Ukraine will meet its foreign debt repayment obligations on time despite the decrease in the levels of its foreign exchange reserves, a senior central bank official said on Thursday.
The Czech crown held steady as the central bank is not expected to change rates on Thursday and market players generally think it will again hold off on intervention to weaken the currency and help a struggling economy.
But SocGen analysts said the central bank would welcome a weaker crown from the current 25.58 per euro.
"In our estimates, the central bank would like to see the EUR/CZK exchange rate at 26.00-26.50 for the rest of the year," they said in a note.
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )
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