EMERGING MARKETS-Reverse gear on China; emerging FX hit

* Emerging stocks reverse gear after China; trade under flat

* C.Europe FX down; eurozone, Hungary, Czech GDP disappoints

* Saudi Dar al Arkan sells bond but less than expected

By Sujata Rao

LONDON, Feb 12 (Reuters) - Emerging stocks reversed gear and slid into negative territory on Friday following a surprise policy tightening move by China but look set to end the week on a positive note after a four-week run of losses.

A risk rally on Thursday following the European Union's pledge to help Greece petered out as the bloc's implicit guarantee is seen as insufficient over a longer term, but global and emerging stocks continued to tick slowly higher.

However, China's surprise move to lift banks' reserve requirements for the second time this year sparked selling.

The MSCI emerging stock index .MSCIEF was trading just under flat by 1100 GMT after earlier inching to a one-week high. Emerging bonds on the JPMorgan EMBI Plus index 11EMJ saw yield spreads to U.S. Treasuries widen slightly to 300 basis points.

Michael Wang, emerging equity strategist at Morgan Stanley said that while sentiment had been slowly improving after recent weakness caused by the Greek crisis and uncertainties over the global economy, more volatility looks likely.

"(The Chinese move) is going to impact sentiment. People may start to question the growth outlook or even maybe the support that emerging markets and China have been giving the global economy but we think China will benefit from some tightening at the margins," Wang said.

"We have been flagging that it is not yet time to buy the correction as we may see another leg down in the market." The Chinese move pushed the dollar back up against most currencies while the euro fell to 8-1/2 month lows and global stocks dropped. Emerging stocks are now down almost 7 percent this year but are up 2.7 percent this week.

There was also bad news on the euro zone economy, with data showing that gross domestic product had barely expanded in the fourth quarter -- a potential drag on the export-reliant emerging European economies.

The euro's dip hit emerging European currencies, with the Polish zloty, Czech crown and the Hungarian forint all weakening by over half a percent to the euro EURPLN= EURHUF= EURCZK=

Dollar crosses suffered more with the rand down almost one percent ZAR= and the Turkish lira dipping 0.8 percent TRY=.

South African markets will likely stay on edge ahead of the finance minister's budget speech due on Wednesday.

"It's all on the China move, nothing else," a currency trader in London said. "It's all headline trading out there, people were nervous about Greece anyway then the China reserve story came out and hit all the EM currencies. Plus you have a long weekend in the United States so everyone is a bit nervous."

RISKS IN UKRAINE, BALKANS, MIDDLE EAST,

Ukrainian bonds fell as Prime Minister Yulia Tymoshenko's refusal to concede election defeat threatens to throw the country back into turmoil. The benchmark 2016 bond was bid down half a point UAHGLB16=RR with its yield up more than 0.5 percent since the start of the month.

However Ukraine's debt insurance costs eased to 973 bps, about 5 bps less than Thursday.

Analysts warned also that the risk of spillover form the Greek debt crisis is not yet past, especially as fiscal deficits remain high in emerging Europe.

And latest fourth quarter data showed Hungary and Romania still in recession and Czech growth stalling. [ID: nLDE61BOB7] [ID:nLDE61A22G] [ID: nLDE61A299].

The Balkan countries are seen as most at risk from Greece though market impact so far has been limited.

"We continue to see potential for increased differentiation on Greek-spillover effects, with probability of feed through coming from Greek banks limiting their activity in the region," Unicredit analysts said in a note.

"In this respect Bulgaria with 28 percent Greek ownership in the top-10, Serbia with 16.6 percent and Romania with 10.4 percent stand out as the more obvious countries."

The relatively weak market sentiment has hurt the borrowing plans of some emerging corporates with at least three companies having pulled Eurobond issues this week. However Saudi real estate firm Dar al Arkan became the first Middle eastern issuer to tap markets this year, issuing a $450 million sukuk bond.

The bond was priced at 11 percent but the size was below the $500-$700 million the company had hoped to raise.

Dubai debt insurance costs continued to rise, being quoted at 595 bps -- about 10 bps wider on the day, CMA DataVision said. (Editing by Andy Bruce)