* China warns U.S. of consequences for Hong Kong law
* Turkish lira firms as economic confidence improves
* South African producer prices data awaited
By Shreyashi Sanyal
Nov 28 (Reuters) - Assets in the developing world declined on Thursday as investors turned away from risk after China warned it would retaliate in response to U.S. legislation backing anti-government protesters in Hong Kong.
U.S. President Donald Trump on Wednesday signed into law legislation that supported the protesters, despite angry objections from Beijing, with which he is seeking an agreement to end a damaging trade war.
Trump's move was widely expected, but how it might affect a trade deal between the two sides remains unclear.
"Now the wait begins to see just how strong the pledged Chinese response will be, and how much it will impact the phase- one trade deal," said Michael Every, senior strategist at Rabobank. "The reaction will be much stronger if China really does follow through on its threat."
MSCI's index for emerging market stocks fell 0.3%, after gaining the day before, putting it on track to end the week flat.
Forex trading, on the other hand, has turned risk-averse in the recent few weeks, with MSCI's index for emerging-market currencies now on track to fall for its third week in a row.
The Russian rouble and South Africa's rand weakened, but the Turkish lira gained after data showed Turkey's economic confidence index rose for the second consecutive month in November. Turkish stocks also rose, by 0.5%.
Investors awaited data from South Africa that is expected to show producer price inflation slowed to 3.05% in October from 4.1% in September.
The South African Reserve Bank kept its repo rate unchanged last week, saying it wanted to see inflation expectations closer to the midpoint of its target range, despite a sustained drop in headline inflation.
The Hungarian, Polish and Czech currencies were stuck in a tight range against the euro.
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For RUSSIAN market report, see (Reporting by Shreyashi Sanyal in Bengaluru, editing by Larry King)