* China shares lead equity gains

* South Korea's factory output rises

* Stocks up 1.3%, FX up 0.3%

Dec 28 (Reuters) - Emerging market stocks and currencies advanced on Thursday, extending strong gains made over the past two months as investors wagered on U.S. interest rate cuts next year.

Argentina was in focus after the country's new president, Javier Milei, sent a package of bills to Congress on Wednesday aimed at tackling the country's economic crisis.

The MSCI's gauge of emerging market stocks jumped 1.3% by 0930 GMT, while a basket of currencies was up 0.3% against the dollar. Both indexes hovered close to multi-month highs.

Assets across emerging markets are set to the end the year on a bright note as the U.S. Federal Reserve's dovish policy stance and a softer inflation report last week has bolstered risk sentiment.

The MSCI's stocks index is set for gains of over 6% for this year after two years of declines, while the currencies index is on track for a gain of over 4%, recovering from last year's losses.

Most emerging Asian stocks rose, with heavyweight China shares leading broader equity gains.

China's blue chip CSI 300 Index jumped 2.3%, marking its best session in five months, while Shanghai's Composite index rose 1.4%.

South Korean shares climbed 1.6% and the won rose 0.6% after data showed November factory output posted the fastest gain since May 2022 on soaring chip production.

J.P.Morgan economists in a note said they continue to expect South Korea's industrial production growth to slow in the fourth quarter after 7.9% annualized growth in the third quarter given the 'high base' at the end of the third quarter.

The Turkish lira touched fresh lows of 29.4505 per dollar with the minutes of the meeting of last week's central bank policy meeting due later in the day.

Turkey's inflation is expected to rise 3.1% in December to stand at 65.1% year-on-year, though the annual rate is seen falling to 42.85% by the end of 2024, a Reuters poll showed.

In Central and Eastern Europe, the Polish zloty edged down 0.4% against the euro, while the Hungarian forint and the Czech crown were mostly steady.

In frontier markets, Fitch on Wednesday downgraded the rating on Ethiopia's only international government bond to "default" from "near default" after the east African country failed to make a $33 million coupon payment.

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 CENTRAL EUROPE market report, see

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For RUSSIAN market report, see (Reporting by Siddarth S in Bengaluru; editing by Christina Fincher)