Wednesday, May 5, 2010

Romania Stocks Drop Most in a Year, Zloty Weakens on Contagion

By Krystof Chamonikolas and Piotr Skolimowski

May 5 (Bloomberg) -- Romanian stocks dropped the most in almost a year and the Polish zloty headed for its weakest close since February, leading a selloff of emerging-Europe assets as concern mounted about the continent’s sovereign debt.

Romania’s BET equity index plunged as much as 6 percent and was down 2.4 percent at 5,287.63 as of 1:32 p.m. in Bucharest. Czech stocks fell 2.1 percent, Kazakhstan’s KASE index declined 3.4 percent, poised for its biggest drop in three months, and Poland’s WIG20 sank 0.6 percent. The zloty weakened 0.4 percent to 4.0185 per euro.

The MSCI Emerging Markets Index declined to a two-month low and the euro retreated for a third day against the dollar to its weakest in more than a year on concern that government debt levels may stall the economic recovery.

“The problems of Greece and the eurozone peripheral countries may mean weaker European growth,” said Imran Ahmad, an emerging-market strategist at Royal Bank of Scotland Group Plc in London. “With the bulk of exports in east European countries going there, the impact will be felt.”

Hungary, Romania and Bulgaria are the eastern European nations most exposed to contagion from Greece, Danske Bank A/S and Capital Economics said last week. About 15 percent of total assets of Romania’s banks are owned by Greek parents. Romania is under International Monetary Fund review for targets agreed in a 20 billion-euro ($26.5 billion) bailout. Hungary was the first European Union member to get an IMF rescue package during the global financial crisis.

BNP Paribas SA said today Polish assets are vulnerable to a selloff because of the degree of investment in the only EU state that avoided a recession last eyar.

‘Pain Trade’

“Positioning” in Poland “is very concentrated on all asset classes and the degree of confidence in the trade is relatively high, making it the pain trade” par excellence, analysts at France’s biggest bank wrote. “In addition, there are no concerns of financial stability, hence authorities will not try to tame” the zloty’s weakness.

Banca Transilvania SA, Romania’s second-largest publicly traded bank, slid 4.3 percent to 2 lei, its lowest in almost three months. The stock accounts for 20 percent of the BET’s weighting.

OTP Bank Nyrt, Hungary’s largest lender, fell 1.3 percent to 6,760 forint, and FHB Mortgage Bank Nyrt was down 2 percent at 1,392 forint in Budapest. Hungary’s main BUX index was little changed after earlier losing as much as 1.3 percent.

“Should contagion fears persist, it is worth positioning on less risky trades” while eastern Europe and its currencies remain “under siege,” Guillaume Tresca, an emerging-market strategist at Credit Agricole CIB in Paris, wrote in a note to clients. “Since the current issue is seen as a pure European debt problem it should mean that LatAm countries are less affected.”

No comments: