* Weak China data fuels stimulus hopes

* Turkey's lira falls sharply to new record low

* Hungary's industrial output drops

* EM FX muted, stocks up 0.6%

June 7 (Reuters) - Emerging markets stocks rose on Wednesday as hopes of an economic stimulus from China lifted sentiment, while Turkey's lira plunged 7% to an all-time low against the dollar on a likely loosening of stabilising measures for the currency.

The MSCI's emerging markets (EM) equities index was up 0.6% by 0845 am GMT, inching closer to a two-month high.

China's blue-chip index slipped after data showed exports in the world's second biggest economy shrank much faster than expected in May owing to a fall in global demand, while the yuan was muted.

However, Hong Kong's Hang Seng index and some other Asian stocks rose on hopes the data would fuel odds of more policy stimulus from China to shore up its faltering economic growth after the pandemic.

EM currencies were muted, with the dollar shaky, as traders assessed whether an end to the global monetary policy tightening cycle was near.

Turkey's lira breached the 23-to-the-dollar mark in its biggest daily selloff since a historic crash in 2021, as newly re-elected President Tayyip Erdogan's government appeared to loosen stabilising measures in its pivot to more orthodox policies.

"Today’s sharp fall in the value of the lira is an indication the currency is allowed to trade far more freely," said Piotr Matys, senior FX analyst at In Touch Capital Markets.

The appointment of veteran policymaker Mehmet Simsek, known for his market-friendly approach, as Turkey's finance minister had first signalled a shift to more conventional policies by Erdogan.

"If there is indeed a monetary policy pivot coming shortly, then the orthodox approach would be to allow the market to find a “fair value” for the lira before raising interest rates, which could be what we are seeing now," said Jon Harrison, managing director of emerging market macro strategy at TS Lombard.

Turkey's main stock index touched its highest level in five months and was last up 3.8%.

South Africa's rand gained 0.3% against the dollar, reversing early declines.

Meanwhile in central and eastern Europe, Hungary's industrial output dropped faster-than-expected in April, according to preliminary data.

The country's central bank will release minutes from its latest monetary policy meeting later in the day.

For GRAPHIC on emerging market FX performance in 2023, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2023, see https://tmsnrt.rs/2OusNdX

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For RUSSIAN market report, see (Reporting by Siddarth S in Bengaluru; Editing by Janane Venkatraman)