By Carolyn Cohn
LONDON, Sept 23 (Reuters) - Emerging stocks edged up on Monday following strong Chinese manufacturing data, but Ukrainian debt insurance costs rose after a rating downgrade late last week.
Chinese data boosted emerging assets after they lost ground on Friday on speculation the Federal Reserve would start to cut its money-printing programme as early as October, after it held steady this month.
But emerging markets have generally reacted positively to the postponement of the stimulus withdrawal.
'The markets are definitely working on an assumption of Fed delay to tapering - that brings investors a moment of relief,' said Luis Costa, head of CEEMEA debt and FX strategy at Citi.
'However, the bearish case doesn't collapse entirely, we are in the middle of a bigger bearish cycle for (emerging market) rates and FX.'
The MSCI emerging equities index rose 0.3 percent towards recent 3-1/2 month highs and has rallied 9 percent this month. But the index remains in the red for the year.
Chinese shares rose more than 1 percent after a two-day break, following China's flash HSBC PMI survey for manufacturing, which climbed to 51.2 in September from 50.1 in August.
Indian stocks fell 2 percent, however, extending Friday's losses after a surprise rate hike.
Emerging European currencies were steady to weaker and emerging sovereign debt spreads widened 2 basis points to 326 bps over U.S. Treasuries.
Ukraine's debt spreads widened by 12 basis points to 796 bps over U.S. Treasuries and five-year credit default swaps rose 12 bps to three-month highs of 900 bps, according to Markit, after Moody's cut Ukraine's rating late on Friday, to Caa1 with review for further downgrade.
'Ukraine is now in the basket of credits, including Egypt, Pakistan, Cyprus, Jamaica, Belize, Ecuador, and Cuba ... that either have or are on the brink of restructuring,' said Tim Ash, emerging markets strategist at Standard Bank, in a client note.
The Kenyan shilling held steady within recent ranges as investors traded cautiously after a weekend attack by Islamist militants on a shopping mall in Nairobi.
The Croatian kuna hit 5-1/2 month lows after Fitch cut the country's credit rating to junk on Friday.
Israel's shekel dipped 0.2 percent, retreating from recent two-year highs ahead of a rate decision on Monday which is expected to result in unchanged rates of 1.25 percent.
(For GRAPHIC on MSCI emerging index performance 2013, see http://link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2013, see http://link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2013, see http://link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see)
(Additional reporting by Sujata Rao; Editing by Catherine Evans)
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