* China valuations remain in the middle of the pack in Asia
* Euro soft as French polls rattle bond markets
* Philippine peso hits a fresh 10-year low
By Saikat Chatterjee
HONG KONG, Feb 21 (Reuters) - Asian stocks held ground on Tuesday though Chinese equities surged to a fresh 2-1/2 month high as domestic funds piled into financial counters on expectations the world's second biggest economy may have turned a corner.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.2 percent on Tuesday and held below a 19-month peak hit last Thursday. The index is up more than 11 percent since Dec. 23, which marked the trough in a selloff triggered by Donald Trump's surprise win at the U.S. election in November.
With U.S. markets closed for the Presidents Holiday on Monday, Asian markets have had few global cues off which to trade. European markets are broadly expected to follow in Asia's wake and seen drifting in a narrow band.
Chinese stocks led regional gainers with mainland indexes extending a nearly 7 percent rise over the last month thanks to an influx of fresh funds from domestic institutional investors and a brightening outlook for the domestic economy.
"We upgraded our China equities call last month because of the strong economic data and comments coming out from the new U.S. administration pointing to a softer stance towards China," said Francis Cheung, head of China-Hong Kong strategy at CLSA.
China's blue-chip index clocked its best day in six months on Monday on reports pension funds will begin pumping in funds into the country's stock markets. Meanwhile, turnover in Hong Kong shares has jumped noticeably in recent weeks.
Despite the bounce in mainland stocks, valuations remained broadly middle of the pack in Asia with price-to-earnings multiples for Chinese stocks at 19.7, far below Australia's and India's at 25 and 23, respectively.
Some investors such as Lan Wang Simond, manager of the Mandarin Fund at Pictet Asset Management, are cautious about companies in the old economy such as manufacturing giants who have not adapted to changing demand patterns.
EURO CAUTION
In currency markets, the euro nursed overnight losses as lingering concerns about the looming French election rattled the currency region's bonds.
The single currency declined to $1.0581, having moved little on Monday, due partly to the absence of U.S. investors because of the public holiday. It has fallen nearly 2 percent so far this month.
Political concerns have been front and centre of investors' minds over the past week or so, with markets wary about the outcome of the French elections in the wake of Brexit.