* China tips into deflation
* China major state-owned banks seen selling dollars
* Jailed Pakistan ex-PM barred from politics for 5 years
* Poland to hold parliamentary election on Oct 15
Aug 9 (Reuters) - Most emerging market stocks and currencies steadied on Wednesday against a weak dollar while China stocks dropped after consumer prices in the world's second-largest economy fell into deflation, dealing a further blow to sentiment.
A fall in heavily weighted Chinese blue-chips and Hong Kong stocks capped gains in the MSCI EM stocks index , up 0.4%.
Data showed China's consumer sector fell into deflation, indicating sluggish demand, and factory-gate prices extended declines in July.
"The big question is how long this deflationary episode will last and whether authorities will react with a raft of stimulatory fiscal and monetary measures," said Stuart Cole, chief macro economist at Equiti Capital.
"Unfortunately, the PBOC is already facing problem of a weaker currency and already high domestic debt, while on the fiscal front, local regional authorities are already under pressure to exercise more prudence."
Commerzbank's Senior Economist Tommy Wu, in a note, added markets and businesses should get used to the 'new normal' where China's government will avoid rolling out big stimulus and instead opt for targeted ones.
Bucking the subdued trend across Asia, South Korean shares closed 1.2% higher, rebounding from Tuesday's near one-month low.
South Africa's equity market was closed on Wednesday.
Traders also awaited the U.S. July inflation print on Thursday to gauge the Federal Reserve interest rates' trajectory.
A 0.3% gain in MSCI EM currencies index indicated a somewhat improved risk appetite, with the dollar shedding 0.2%.
China's yuan strengthened 0.2% against the greenback as major state-owned banks were seen selling dollars to slow the pace of the yuan's decline.
Former Pakistani prime minister Imran Khan, convicted and jailed on graft charges, was barred from politics for five years on Tuesday, an official order said.
Focus will now shift to an upcoming election with Khan, who has been at the heart of political turmoil since being ousted as prime minister in a vote of no-confidence last year, out of the political picture for now.
The rupee and stocks gained 0.3% and 1%, respectively.
Poland's President on Tuesday said a parliamentary election will be held on Oct 15, a vote that will determine Warsaw's relations with the European Union at a time when it faces rising tensions on its eastern border.
Poland's zloty was up 0.1% against the euro, while Hungary's forint gained 0.5% ahead of minutes from the July central bank policy meeting.
Russia's rouble hovered near a more than 16-month low against the dollar, with traders awaiting July inflation data and a review on monetary policy transmission later in the day.
Kenya is set to deliver its policy decision during the day. (Reporting by Ankika Biswas in Bengaluru; Editing by Nivedita Bhattacharjee)
