EMERGING MARKETS-Malaysian ringgit at 26-yr low, yuan struggles for direction after China rate cut

* Malaysian ringgit hits lowest since January 1998 * China cuts 5-year LPR by 25 basis points * Thai baht reaches 3-1/2-month low (Updates at 0757 GMT) By Himanshi Akhand Feb 20 (Reuters) - Malaysia's ringgit reached a 26-year-low on Tuesday as emerging Asian currencies weakened against the dollar, while the Chinese yuan slid after China cut its benchmark mortgage rate by more than expected, but found support from state bank buying. The ringgit weakened as much as 0.2% to its lowest level since January 1998. The South Korean won and the Taiwanese dollar inched 0.2% and 0.4% lower, respectively. "Negative rate differentials with the U.S., have translated into capital outflows and corporate hoarding of USD, exacerbating the downward pressure on the ringgit," Nicholas Chia, macro strategist at Standard Chartered, said. Meanwhile, the Chinese yuan was last flat at 7.199 per dollar, after touching its lowest level in three months earlier in the session. Sources told Reuters that China's major state-owned banks were seen selling dollars in an attempt to arrest weakness in the yuan in the wake of a deep cut to the benchmark mortgage rate. China cut the five-year loan prime rate (LPR), the benchmark reference rate for mortgages, by 25 basis points to 3.95% at a monthly fixing, as authorities ramped up efforts to stimulate credit demand and revive the property market. That was a deeper cut than the five-to-15-bps reduction market watchers polled by Reuters had expected and was also the largest cut since the reference rate was introduced in 2019. Shanghai stocks closed 0.4% higher. They had fallen as much as 0.8% earlier in the session. Equities in Kuala Lumpur rose 0.9% to their highest level since early-June 2022, and stocks in Manila rose 0.8%. Stocks in Seoul dropped 0.8%, as investors booked profits after a recent rally. Thailand's stock market fell 0.6% and the baht weakened as much as 0.6% to its lowest level since Nov. 1, 2023. Data on Monday showed Thailand's economy unexpectedly contracted in the fourth quarter of 2023. Prime Minister Srettha Thavisin said the economy was in a critical stage and again urged the central bank to cut interest rates without waiting for a scheduled meeting. Srettha, also the finance minister, has been at loggerheads with the Bank of Thailand (BOT) over its monetary policy path. "Given the very weak economic data yesterday, the BOT is under heavy pressure from various fronts to ease rates and we would not rule out the risk that they may have to start an easing cycle with multiple cuts ahead of the Fed," analysts at Maybank wrote. The BOT's next meeting is scheduled for April 10. In Indonesia, the rupiah inched 0.2% lower while stocks were up 0.6% ahead of Bank Indonesia's (BI) rate decision on Wednesday. Economists in a Reuters poll expect BI to keep its key policy rate unchanged on the back of subdued inflation and an improving currency outlook and see the first rate cut in the next quarter. HIGHLIGHTS ** Bank of Korea rate decision due on Thursday ** Thailand plans $1 bln in overseas bonds, official says ** Malaysia's Jan exports rise more than expected Asia stock indexes and currencies at 0757 GMT COUNTRY FX RIC FX FX INDE STOCKS STOCKS DAILY % YTD % X DAILY YTD % % Japan -0.18 -6.20 <.N2 -0.28 14.64 25> China EC> India +0.07 +0.30 <.NS 0.16 1.96 EI> Indonesi -0.19 -1.66 <.JK 0.61 0.94 a SE> Malaysia -0.19 -4.24 <.KL 0.90 6.72 SE> Philippi +0.02 -1.16 <.PS 0.82 6.27 nes I> S.Korea 11> Singapor -0.06 -2.00 <.ST 0.32 -0.13 e I> Taiwan -0.35 -2.44 <.TW 0.63 4.59 II> Thailand -0.42 -5.46 <.SE -0.59 -2.59 TI> (Reporting by Himanshi Akhand in Bengaluru; Editing by Sonali Paul and Janane Venkatraman)