EMERGING MARKETS-Emerging market stocks rally as US voting starts; China tempers optimism

LONDON, Nov 8 (Reuters) - Hopes of a U.S. election victory for Democrat Hillary Clinton lifted emerging market equities for the second straight day on Tuesday, although currency gains stalled and Turkey’s lira hit record lows against the dollar.

Disappointing Chinese trade data and messy politics in some countries made some investors cautious on emerging market assets. Those assets have rallied in line with developed market stocks as Republican Donald Trump, with his controversial views on tax, immigration and trade, slipped in pre-election polls.

MSCI’s emerging markets benchmark advanced 0.6 percent, and markets in Russia, South Africa, Poland and parts of Asia gained 1 percent or more.

The gains came as voting began in earnest in U.S. presidential elections, one of the most contentious in the country’s history.

“As U.S. voters enter the elections ... most EM asset prices are where one would think they should be, rallying on the latest opinion poll results,” said Simon Quijano-Evans, a strategist at Legal & General Investment Management.

He said, however, uncertainty over potential dollar moves after the election were keeping investors cautious on emerging market currencies and early voting results in parts of New Hampshire confirming how close the race was.

“(Dollar) is one gauge that has not been overly optimistic in recent weeks and we could get a shock in either direction. Markets are treading carefully - there is not massive euphoria there,” Quijano-Evans added.

Emerging market currencies also came under pressure from Chinese data showing exports and imports fell more than expected in October. The yuan hovered near one-week lows against the dollar as weak domestic and global demand added to doubts about a sustainable pick-up in Chinese economic activity.

That weighed on commodity-linked currencies such as the rand and rouble .

The rand fell 0.5 percent against the dollar as a senior policymaker warned South African borrowing costs could “double or triple” if agencies downgrade its credit rating to “junk” in coming months as expected.

Turkish assets came under fresh pressure on concern about the detentions of pro-Kurdish opposition politicians and deteriorating relations with the European Union, which is expected to issue a damning progress report on Wednesday.

The lira reached a record low of 3.1849 to the dollar, having weakened more than 8 percent since the start of the year. Turkish stocks also bucked the bullish equity trend, slipping 0.2 percent. Lira volatility, a gauge of expected swings in a currency, rose to three-month highs .

JPMorgan analysts noted that politics had dominated the headlines in both South Africa and Turkey. They added that the former may have “found a circuit breaker between politics and market price action, but in Turkey the link between markets and political headlines is strengthening.”

They added that support for the lira was deteriorating “as political noise could further dent local confidence and spur deposit dollarization. We now see increasing risks for both the lira and FX volatility.”

Central European currencies weakened against the euro, with Hungary’s forint slipping 0.3 percent as Prime Minister Victor Orban failed to secure enough votes for a change in law to ban the resettlement of migrants in the country.

For GRAPHIC on emerging market FX performance 2016, see

For GRAPHIC on MSCI emerging index performance 2016, see

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see ) (Additional reporting by Sujata Rao, editing by Larry King)