* Russia lags emerging market gains on bad debt worries
* Polish zloty up 1 pct to lead emerging Europe FX gains
* Hungarian forint, Czech crown extend gains
By Sebastian Tong
LONDON, July 1 (Reuters) - Emerging assets firmed on Wednesday on a deepening conviction that the global economy has bottomed out but Russian equities sank on the threat of rising corporate loan defaults in the country.
The Polish zloty led broader eastern European currency gains to rise 1 percent versus the euro
Though the closely watched tankan survey of Japanese business sentiment in June proved weaker-than-expected, encouraging if unimpressive data from Chinese and euro zone manufacturers helped dispel some of the gloom. [ID:nT53503] [ID:nPEK138883] [ID:nL1596673]
Emerging shares <.MSCIEF>, which ended June with the best quarter on record with a 33-percent rise, were up 1 percent to 769.43 by 1150 GMT while emerging sovereign debt spreads tightened 2 basis points to trade at 422 bps over U.S. Treasuries.
An asset allocation poll by Thomson Reuters for June showed cash reserves at a 23-month low, indicating that money was being put to work. [ID:nLU647080]
The exception to the stronger tone in equity markets were
Russian shares <.IRTS>, which slid 1.3 percent, failing to
capitalise on oil's
Russian Prime Minister Vladimir Putin has ordered state banks to boost lending by as much as $16 billion and the country's budget deficit could top 6 percent next year on a recapitalisation of its banking sector. [ID:nLU50495]
"We're expecting non-performing loans to hit 20 percent but this should be less of a worry than it was a few months ago because of higher oil prices," said John Lomax, head of emerging markets equity strategy at HSBC.
"Individual companies may face refinancing problems but it's hard to envisage a systemic banking crisis that the Russian state can't cope with."
CURRENCIES RISE
South Africa's rand backed off from 11-month highs it touched against the dollar
The country's purchasing manager's index rose for the second consecutive month in June, suggesting that the worst of the decline in its manufacturing sector might be over. [ID:nL1122159]
The brightening global economic outlook also bolstered emerging European currencies, sending the Polish zloty to a five-week high against the euro and helping the Czech crown
The prospect of imminent interest rate cuts failed to weaken the Hungarian forint
Along with its regional peers, Romania's leu
"Even the weakening effect of current monetary policy easing on the exchange rate is more than counterbalanced by the regional positive sentiment improvement...We expect the appreciation trend to reverse on the back of weak economic fundamentals and worsening imbalances," UniCredit said in a client note. (Reporting by Sebastian Tong; Editing by Toby Chopra)