Nov 1 (Reuters) - A surprisingly good factory report out of China helped emerging market shares make a positive start to November and they looked set for a fourth straight week of gains, while South Africa's rand barely moved as a Moody's review loomed.
Mainland China shares jumped 1% and more to lead gains among major Asian stock indices after factory activity in China expanded at its fastest pace in more than two years in October as export orders and production rose, a private business survey showed on Friday.
Following a second month of gains, MSCI's index of developing world stocks rose 0.3% to the highest levels since late July. Russian shares rose 0.6% to stay near record highs, while those listed in Johannesburg gained almost 0.3%
"It's a couple of things," said Koon Chow, EM FX and macro analyst at UBP.
"A little bit of positivism from China PMI,... hopes that the conflict between China and U.S. on trade have been dialled down quite significantly, and lastly people are looking increasingly at the resilience of the U.S. markets, which broke new highs."
While investors are still cautious, these factors are giving a 'positive wind' to emerging markets, he said.
Currencies were mostly higher against a beaten down dollar, putting developing world currencies on course for a fifth week of gains.
Turkey's lira fell 0.3% after a business survey showed manufacturing activity returned to contraction last month after a pause in September, due to a slowdown in new orders. But the lira was set to end higher for the third straight week.
South Africa's rand traded 0.05% lower.
Moody's is the only ratings agency out of the main three with an investment grade assigned to South Africa's sovereign debt. Worries about losing it were sparked by the resumption of nationwide blackouts in Africa's most industrialized economy, and exacerbated by a medium-term budget that showed wider deficit and rising debt.
At the least Moody's is expected to change the outlook to negative from stable, wrote Piotr Matys, senior emerging markets FX strategist at Rabobank, but a downgrade cannot be excluded, which would trigger substantial capital outflows from bonds as the country would lose its place in the FTSE World Government Bond Index.
"It would have significant negative implications as the country relies on portfolio investment to finance its current account deficit."
"A downgrade would exacerbate fiscal woes... Inflationary pressure would increase as the rand would weaken markedly... limiting room for manoeuvre for the central bank to consider an interest rate cut to support sluggish GDP growth," Rabobank's Matys said.
The rand is set for its worst week since early September, down almost 3%.
For TOP NEWS across emerging markets
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru; Editing by Kim Coghill)