Nov 17 (Reuters) – Emerging market shares fell from two-month highs on Friday, led by a slump in Chinese e-commerce giant Alibaba, while currencies were set for their best week in four months as weak U.S. economic data boosted rate cut bets.

Alibaba’s Hong Kong listed shares 9988.HK dropped 8%, after the company scrapped plans to spin off its cloud business, citing uncertainties created by U.S. export curbs on chips used in artificial intelligence applications.

Its U.S. shares BABA.N closed down 9% on Thursday.

Hong Kong’s main index .HSI dropped 2.1% in the sharpest single-day drop in a month, while MSCI’s index of emerging market stocks .MSCIEF slipped 0.6%.

The EM index, however, is set to end the week about 3% higher as risk sentiment improved this week thanks to cooling U.S. inflation data as well as figures that showed the U.S. labour market was weakening.

Investors are betting that the U.S. Federal Reserve could begin interest rate cuts as soon as the second quarter of next year and lower the main rate by almost 100 basis points through the year.

As the dollar headed for weekly losses, developing market currencies .MIEM00000CUS ticked up, set for the best week since July, up 1.1%. FRX/


Most analysts expect emerging market assets, especially currencies, to perform well next year.

“Compared with developed market assets, our targets suggest modest outperformance for emerging markets next year,” said strategist at Goldman Sachs, citing a more “benign” global and EM macro outlook – with steady growth, lower inflation and the potential for rate cuts.

South Africa’s rand ZAR= was flat on Friday ahead of S&P Global Ratings’ review of South Africa’s sovereign credit rating later in the day. .J

S&P downgraded its outlook to stable from positive in March, citing infrastructure constraints and a severe power crisis, and made no changes to the country’s sovereign credit rating or outlook in May.

Taiwan’s currencyTWD= rose 0.3%, boosted by the prospects of an easing in cross-strait tensions, while China’s yuan CNY=CFXS was also set for its biggest weekly gain in two months.

The Polish zloty EURPLN= hovered near record highs, while Hungary’s forint EURHUF= dipped slightly for the week amid calls for rate cuts by economic development minister Marton Nagy.


In EM bonds, hard currency bonds have returned 1% this week and 3.2% this month, which is the bulk of the year’s 3.6% rise.

(Reporting by Susan Mathew in Bengaluru; Editing by Shinjini Ganguli)