May 23 (Reuters) – Emerging market stocks were pulled down on Tuesday by concerns around China’s uneven economic recovery and uncertainty over a U.S. debt ceiling deal, while the Hungary’s forint weakened ahead of a widely expected interest rate cut

MSCI’s index for emerging market equities .MSCIEF was down 0.2% by 0826 GMT, slipping from a two-week high hit earlier in the session, while currencies .MIEM00000CUS were 0.1% lower.

China’s blue-chip stocks .CSI300 fell 1.4% as investors remained concerned that the country’s post-pandemic recovery was on a weak footing after a slew of downbeat data in April, while leaders of the Group of Seven (G7) rich democracies pledged to “de-risk” without “decoupling” from China.

The yuan CNY=CFXS inched closer to five-month lows hit recently as the dollar firmed following hawkish comments from some Federal Reserve officials and after U.S. President Joe Biden and House Speaker Kevin McCarthy failed to reach an agreement on Monday on raising the debt ceiling.

The Hungarian forint EURHUF= eased 0.6% against the euro ahead of a local monetary policy decision where analysts expect the National Bank of Hungary (NBH) to deliver the region’s first interest rate cut since 2021.

A majority of economists polled by Reuters projected a 100 bps cut in the one-day rate to 17%, given a pullback in gas prices and consumer demand.

“I would say that the market is okay (with) the story of the normalisation of NBH and the pressure on the forint is not that high,” said Frantisek Taborsky, EMEA FX strategist at ING.

“Of course we can see some weakness after the decision but in general I think that the forint is still a very good currency for the market because the carry or the interest rate differential is still very high despite the possible rate cut today.”

Poland’s zloty EURPLN= gained 0.1% versus the euro. Data showed Polish retail sales fell 7.3% year-on-year in April, less than a 7.8% decline forecast by analysts.

While EM currencies started 2023 on a strong note, they have been pressured in recent weeks by signs of weak economic recovery in China and as the U.S. debt ceiling standoff stokes fears of a hit to global growth.

Turkey’s lira TRYTOM=D3 languished at record lows as markets braced for a presidential runoff vote where incumbent Tayyip Erdogan is widely expected to be re-elected and to continue with his unorthodox monetary policies.

Turkish central bank gross reserves are expected to have fallen some $3.5 billion to about $101.5 billion last week, calculations of five bankers showed on Tuesday.

Elsewhere, holders of Ghana’s international bonds face a principal write down of 30% and a cut to coupons of 20% in an upcoming debt restructuring, Morgan Stanley said on Monday.

For GRAPHIC on emerging market FX performance in 2023, see http://tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance in 2023, see https://tmsnrt.rs/2OusNdX

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(Reporting by Amruta Khandekar; Editing by Kirsten Donovan)