UPDATE 2-South African rand hits all-time low, shares fall in emerging market sell-off

* Rand plummets to 16.20 versus dollar

* Blue chip index fall to four and a half month low

* Government bonds buck the downward trend (Adds latest prices, analyst comments)

JOHANNESBURG, Jan 7 (Reuters) - The South African rand fell to a record low against the dollar on Thursday, despite a generally weaker greenback, and stocks dropped more than 2 percent as renewed concerns about China’s economy spurred an emerging markets sell-off.

The fall in the currency largely reflected a retreat in broader emerging currencies as China accelerated the yuan’s depreciation, heightening concerns over the world’s second-largest economy.

The rand was also victim to South Africa’s weak economic fundamentals, with data showing deteriorating business confidence in Africa’s most advanced economy.

“Until market sentiment turns for the commodity linked currencies ... there’s probably going to be more losses on the cards for the rand,” NKC African Economics economist Bart Stemmet said.

By 1516 GMT, the rand was at 15.9735 per dollar, down 0.76 percent, off a session low of 16.2015 as the dollar held earlier losses after U.S. weekly jobless data.

Government bonds were firmer, reversing earlier losses with the yield on South Africa’s benchmark 2026 issue shedding 1 basis point to 9.605 percent.

The South African bourse was not spared the sell-off, with the benchmark Top-40 index falling to its lowest level in four and a half months, before recovering to close 2.18 percent down at 43,186.36 points.

Anglo American Platinum was the worst performer among the blue chips, shedding 6.79 percent to 166.81 rand.

Shares in its parent, diversified mining firm Anglo American , dropped 6.27 percent to 57.44 rand, bring its losses so far this year to 17 percent.

“Confidence at this stage is very, very low and the selling is being done indiscriminately,” said Inkunzi Investments executive partner Owen Nkomo, pointing to slower growth in China and recessions in Russia and Brazil.

The broader all-share index declined 2.1 percent to 48,052.78 points.

The weaker rand, which fuels inflation, has added to equity investors’ fears that South Africa’s credit rating could be downgraded this year, said Nkomo.

Investors are also worried about sluggish growth in Africa’s second largest and most industrialised economy and the direction of policy after a cabinet reshuffle in December.

President Jacob Zuma appointed Pravin Gordhan as finance minister on Dec. 13, in a dramatic U-turn that gave South Africa its third finance chief in a week after a selling frenzy in the markets. (Editing by Mark Potter)