EMERGING MARKETS-Stocks weaken, focus on banks, debt

* Emerging stocks hit week's low, debt spreads steady

* Forint hits record low vs Swiss franc, leu at 2-month low

* Russia may issue rouble Eurobond in November

By Carolyn Cohn

LONDON, Sept 8 (Reuters) - Emerging stocks hit their lowest point this week on Wednesday as concern about the European banking system hit risky assets and worries about domestic finances fuelled weakness in the Hungarian forint and Romanian leu.

Worries about Europe's banks have resurfaced after the Wall Street Journal reported that some major lenders had understated holdings in potentially risky government debt during stress tests designed to test their ability to weather crises.

Sentiment worsened after Ireland extended its guarantees for short-term bank liabilities, amid fears over the escalating cost of bailing out nationalised lender Anglo Irish Bank.

Hungary and Romania are among emerging European countries seen as most vulnerable to banking and debt crises in Europe, and recent data has failed to encourage investors.

"Renewed European banking worries are weighing on the markets, but it is also notable that we now are beginning to see some softening in European macro data," said Lars Christensen, chief emerging markets analyst at Danske in Copenhagen.

"In central Europe the industrial production numbers for July in general have disappointed -- in line with what we have seen in the German data. So double-dip fears could be returning to Europe." The MSCI emerging equities index <.MSCIEF> dropped 0.4 percent to its lowest since Friday and the Thomson Reuters emerging Europe index <.TRXFLDEEPU> tested six-day lows.

Emerging sovereign debt spreads <11EMJ>, however, edged in by 1 basis point to 291 bps over U.S. Treasuries.

The Czech Republic, Lithuania and Montenegro have issued Eurobonds this week, as spreads remain below the psychologically key 300 bps level and investors return from holidays.

Russia could issue a $1 billion-$3 billion, 5-year rouble Eurobond by mid-November, Deputy Finance Minister Dmitry Pankin said on Wednesday. [ID:nLDE687044]

FORINT FALLS

The Hungarian forint hit a record low against the Swiss franc for a second straight day, in line with a record low euro/Swiss franc , and a 1-1/2 month low against the euro , while Hungary's debt insurance costs rose to three-month highs.

Hungary has one of the highest debt to GDP ratios in emerging Europe, and Prime Minister Viktor Orban this week reiterated his aim to regain financial independence, rather than relying on aid from the European Union and International Monetary Fund.

The strong Swiss franc is potentially damaging for Hungarian businesses and households with Swiss franc loans.

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"Swiss franc/forint continues to hit record high levels and we are just 2 percent away from what the (central bank) considered as the worst case scenario in stress tests from a few months ago," said BNP Paribas analysts in a client note.

Hungarian five-year credit default swaps rose 6 bps to 380 bps, according to data from Markit.

The Romanian leu hit a 2-month low against the euro for a second day in the aftermath of a government reshuffle last week which led to a change in finance minister.

Bucharest's government faces a series of potentially close votes over an austerity plan tied to its EU/IMF bailout.

The Turkish lira and Turkish stocks .XU100 hit a one-week low ahead of holidays in Turkey and a referendum on constitutional reform on Sunday.

The constitutional referendum is seen as a pointer to how the ruling AK Party will fare in a general election due by July 2011.

The Ukrainian hryvnia recovered slightly after hitting a five-month low on Tuesday. The central bank sold $100 million for hryvnia on Tuesday to support the currency.

The hryvnia's sudden fall this month following a reshuffle at the central bank reflects investors' concerns about the impact of President Viktor Yanukovich's power consolidation drive on economic policies. [ID:nLDE68519F]

The Serbian dinar also edged up after Serbia's central bank raised its benchmark interest rate on Tuesday by half a point to 9 percent in a surprise move. [ID:nLDE68619G] (Additional reporting by Sebastian Tong; Editing by Hugh Lawson)