LONDON, March 9 (Reuters) - Emerging equities slipped for a second day on Wednesday as more Chinese growth concerns led some to sell out of the recent seven-day rally, while South African assets took a hit from Moody's' decision to put its rating on review.
The rand extended its losses against the dollar after falling more than 1 percent on Tuesday, when ratings agency Moody's placed South Africa's sovereign credit rating on review for a downgrade.
South Africa's five-year credit default swaps rose 2 basis points to 335 bps after a nine bps move on Tuesday, according to Markit.
Moody's cited the economy's weak growth prospects and worsening fiscal position. It is the only agency that does not have South Africa a notch away from junk status.
"South Africa's investment grade rating is under threat - they won't be able to keep it," said Per Hammarlund, chief emerging markets strategist at SEB. "It was largely expected as the deterioration in South Africa has gone on so long now."
The country's current account deficit has also widened more than expected.
MSCI's benchmark emerging equity index slipped 0.3 percent, giving up more of the 12.5 percent gains it chalked up from a Feb 12 trough. It fell 1 percent on Tuesday.
Investors have become cautious on the growth outlook again after a sharp fall in Chinese exports in February, and Hammarlund said they were likely banking profits following the rally.
Chinese mainland shares lost more than 1 percent ending a six-session winning streak.
Russian dollar-denominated stocks fell more than 2 percent and rouble-listed shares dropped 1.3 percent, playing catch up after markets were closed for a public holiday on Tuesday.
Oil prices continued to hold above $40 a barrel, helping the rouble firm 1.2 percent against the dollar. But most Gulf bourses remained in the red.
Budapest shares continued to rally, touching fresh six-year highs as shares in Central Europe's biggest independent lender OTP extended gains.
Other Hungarian stocks also gained as the Budapest bourse announced a new strategy to boost new listings and reverse a fall in turnover seen in recent years.
Hammarlund said there had been a change in tone from the Hungarian government, which looks likely to cut bank taxes to help credit growth. "The government is becoming more market-friendly and that is helping to boost sentiment towards Hungary," he said.
The Malaysian ringgit weakened 0.27 percent against the dollar after the central bank kept its key interest rate on hold at 3.25 percent.
Argentina's sovereign dollar bond spreads narrowed as much as 7 bps on Wednesday to 457 bps after a bill aimed at stopping Argentina's economic decline by ending its 14-year banishment from the global bond market passed its first legislative hurdle.
For GRAPHIC on emerging market FX performance 2016, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2016, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2016, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2016, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see ) (Editing by Hugh Lawson)