EMERGING MARKETS-Fresh COVID-19 cases dent sentiment in Asia, Turkish lira surges

* Lira set for best day in 1-1/2 months

* South African rand leads EMEA losses

* Chilean assets set to fall after election shock

By Ambar Warrick

May 17 (Reuters) - Turkey's lira recovered from near record lows on Monday, as the country lifted some COVID-19 restrictions, while gains in most other emerging market assets were capped by concerns over rising virus cases in Asia, and disappointing Chinese data.

The lira rose about 1.4% to 8.3256, leading gains across Europe, the Middle East and Africa (EMEA), after the government said it will allow movement during the day after a strict lockdown imposed nearly three weeks ago.

The currency was set for its best day since early April, as it recovered from levels close to an all-time low of 8.5789. Concerns over dwindling FX reserves, central bank credibility and general risk aversion had hit the lira hard in recent weeks.

Turkish stocks rose 0.6%, with most other bourses in the EMEA region marking small gains.

Leading losses among EMEA currencies, South Africa's rand dropped 0.5%, while Russia's rouble fell 0.1% ahead of preliminary first quarter GDP data due later in the day.

Chile's stocks and the peso were widely expected to open lower, after the country's center-right ruling coalition suffered a shock loss as voters backed independents for the body that will draft the country's new constitution.

"An 'independent' Constitutional Convention suggests a heightened uncertainty regime ahead," JP Morgan analysts wrote in a note.

Hungary's forint surged 0.7% to a near nine-month high against the euro, after the country's central bank deputy governor Barnabas Virag flagged the possibility of an interest rate hike in June to combat rising inflation.

Broader sentiment was muted after surging COVID-19 cases in Taiwan, Singapore and Japan brewed fears of strict curbs on activity, which would hamper the pace of nascent economic recovery. Taiwanese stocks plunged nearly 3%.

Chinese retail sales widely missed expectations for April, while data showed factories in the country slowed their growth output during the month, pointing to an uneven recovery in the world's second-largest economy.

"It is early days yet, and the impact on the economies of the region will depend in large part on how successful the measures now being rolled out end up being. (If) successful... governments will be able to withdraw restrictions earlier, enabling economic rebound to return," analysts at ING wrote in a note.

Emerging markets in Asia have widely outpaced their peers this year so far, buoyed by more effectively curbing the pandemic.

For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see https://tmsnrt.rs/2OusNdX

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For RUSSIAN market report, see (Reporting by Ambar Warrick in Bengaluru; Editing by Rashmi Aich)