EMERGING MARKETS-Turkish lira leads EMEA FX losses as geopolitics, virus spike weighs

* Lira breaches 8 to the dollar, bonds also fall

* MSCI EM stocks down 0.4%

* Russian rouble down; C.bank holds rates

By Ambar Warrick

Oct 26 (Reuters) - Turkey's lira hit a record low on Monday on growing concerns over policy and geopolitical issues, with other emerging markets in Europe, Middle East and Africa also retreating as a second wave of coronavirus cases culled demand for risk-linked assets.

The lira sank 1.2% to breach 8 to the dollar, weighed by renewed fighting in the Nagorno-Karabakh region that threatened to upset a new U.S.-brokered ceasefire and tensions between Ankara and Athens over a disputed area in the eastern Mediterranean.

The currency had hit a record low last week after the Turkish central bank's surprise move to hold interest rates raised concerns over how it would combat spiking inflation and dwindling foreign exchange reserves.

"The collapse in the lira has been expected for a very long-time given poor fundamentals," Sebastien Galy, macro strategist at Nordea Asset Management, wrote in a note.

"It is a stark reminder of the great dispersion in performance in emerging markets from China on one side to the default of Zambia or woes of Turkey and South Africa on the other side."

Chinese markets, up 14.5% this year, were among the first in the emerging market space to recoup from the initial shock of the COVID-19 pandemic, while Turkey and South Africa are still struggling to put their economies back on track.

A spike in coronavirus infections in the United States and Europe pushed the MSCI's index of emerging market stocks down 0.4% on Monday, with major bourses in Asia also falling.

Turkish stocks fell about 1.2%, underperforming their EMEA peers and Turkish sovereign bonds also declined in tandem with the lira.

Rising cases in Czech Republic and Hungary also pressured central European stocks and currencies.

South Africa's rand fell 0.6% to the dollar, while stocks also retreated as investors awaited the government's medium-term budget policy statement on Wednesday.

Russia's rouble fell 0.4%. The country's central bank on Friday left its key rate unchanged and promised more daily foreign currency selling.

Elsewhere, ratings agency S&P slashed Zambia's credit rating to "selective default" after the government missed an interest payment last week and announced it would suspend debt service to external commercial creditors.

For GRAPHIC on emerging market FX performance in 2020, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see https://tmsnrt.rs/2OusNdX

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For RUSSIAN market report, see (Reporting by Ambar Warrick in Bengaluru; Editing by Amy Caren Daniel)