By Karin Strohecker
LONDON, Sept 26 Fri Sep 26, 2014 5:39am EDT
LONDON, Sept 26 (Reuters) - Emerging stocks were on track for their third straight week of losses, hit by a broad equities sell-off and dollar strength, while the latest twist in the Sistema saga sent Russian shares down one percent.
The dollar scaled new four-year highs against a basket of major currencies late on Thursday, hitting oil and commodity prices and knocking stocks, with the S&P 500 suffering its biggest one-day loss since July.
Emerging market stocks fell 0.4 percent to a new four-month low. The index is now 7.5 percent off three-year highs hit in early September.
Data shows investors are opting to move out of emerging equities, with dedicated equity funds suffering $600 million in outflows for the week to Sept. 24. Emerging bond funds, however, saw a small inflow of $400 million, banks said, citing EPFR Global which releases data to clients late on Thursdays.
"Investors seem to be growing more nervous, likely on valuation and the growth narrative for (emerging markets)," Barclays analysts said in a note. "This caution - particularly on growth - seems warranted given the continued disappointing China cyclical data and soft commodity prices."
Russian stocks were among the biggest losers after a court seized shares in oil company Bashneft owned by Sistema , a conglomerate controlled by billionaire Vladimir Yevtushenkov.
Prosecutors said they had uncovered "significant violations" of the law in the sale of energy assets, including Bashneft.
"Sistema is a very negative development for the Russian market, and is hurting its reputation among foreign as well as domestic investors," Capital Economics economist, Liza Ermolenko, said.
"It just emphasises that in Russia's current political and economic situation there is no certainty that anyone is safe."
Sistema's dollar bonds fell 3.8 cents to 81.6 cents in the dollar.
The dollar-denominated RTS index fell 1.22 percent while the rouble-based MICEX traded flat. Sistema was the worst performer, chalking up a 11.67 percent fall, while Bashneft was down 2.91 percent.
The rouble hit another record low against the dollar at 38.97, putting it on track for a third week of losses against the greenback.
Meanwhile Ukraine's five-year credit default swaps hit a seven-month high of 1,298 basis points after Moscow accused Kiev of doing everything it could to not repay debt.
Moscow holds a $3 billion eurobond issued by former Ukrainian President Viktor Yanukovich, which entitles Russia to demand repayment should public debt ratios cross a certain threshold.
To add to Ukraine's woes, Hungary's gas pipeline operator suspended gas shipments to Ukraine.
Stocks in India jumped 0.4 percent and the rupee firmed 0.3 percent after Standard & Poor's raised the country's credit rating outlook to stable from negative.
For GRAPHIC on emerging market FX performance 2014, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2014, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2014, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2014, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see ) (Editing by Louise Ireland)
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