* Emerging equities broadly weaker led by Asia
* Regional currencies are mixed, zloty lower
* Latvian lat remains above intervention level
* Ukraine assets little hit by ratings downgrade
By Martina Fuchs
LONDON, Feb 26 (Reuters) - Emerging equities were broadly
lower on Thursday, led down by Asian stocks and underperforming
global markets, with Poland raising the spectre of intervention
as the zloty currency weakened again after Wednesday's rate cut.
Benchmark emerging equities <.MSCIEF> fell 0.27 percent by
1145 GMT, after a 1 percent rise the previous day, but remain
down 11.11 percent on the year -- still above multi-year lows
set late last year.
In contrast, the benchmark global equity markets index
<.MIWD00000PUS> was up 0.15 percent supported by fresh steps
from the British government to shore up its banking sector.
Much of the emerging fall was down to Asian stocks, with
Chinese equities <> down 3.87 percent. Israeli stocks
<> lost 0.32 percent, but some of the other exchanges in
the region were up.
Hungarian equities <> were amongst the largest gainers,
up 0.76 percent but still down 18.62 percent on the year, while
Czech stocks <> were up 0.55 percent.
"We've had a slight rebound in the last couple of days, but
now we are back and worries have not gone away," said Danske
Bank chief emerging markets analyst Lars Christensen. "There is
a little weakness in the currencies but it's relatively
neutral."
Benchmark emerging sovereign debt spreads <11EMJ> were five
basis points narrower at 648 over US Treasuries, implying a
slight rise in appetite for emerging debt compared to US
government paper.
Two of the region's worst performing currencies -- Hungary's
forint <EURHUF=> and Russia's rouble <RUS=MCX=> -- were slightly
stronger, up 0.51 and 0.17 percent respectively but both remain
down around 13 percent this year.
POLISH INTERVENTION?
The Czech crown <EURCZK=> was up 0.49 percent, but the
Polish zloty <EURPLN=> lost 0.1 percent to deepen its recent
losses, but remained above all time lows set earlier this month.
Poland's central bank cut interest rates by 25 basis points
on Wednesday, saying a sharp slowdown in the economy justified
the cut. Poland has now cut rates by 200 basis points in recent
months to 4.0 percent, although Wednesday's cut was not as sharp
as previous ones.
Polish central bank governor Slawomir Skrzypek said on
Thursday that the bank might intervene in the currency markets
to support the zloty. []
The Latvian lat <EURLVL=> was slightly weaker within its
trading band but remained short of Wednesday's intraday lows,
when it fell sharply to the level where the central bank
intervenes to support it.
A government collapse, ratings downgrade and accelerating
economic crisis have increased pressure on the currency, but it
could get short-term support in the coming days as Latvia
receives the first part of a 7.5 billion euro International
Monetary Fund and the European Union-led package.
The cost of protecting Ukranian sovereign debt in the credit
default swaps market fell 124.5 basis points to 4162.5, meaning
it would cost $4.16 million a year to cover $10 million of
five-year debt -- amongst the highest in emerging markets.
Standard & Poor's slashed Ukraine to a CCC+ "junk" rating on
worries about destabilised banks, falling industrial output and
political disunity that puts at risk a $16.4 billion
International Monetary Fund loan programme. []
"The two-notch ratings downgrade appears premature in terms
of timing and too aggressive in terms of magnitude," said Sergei
Voloboev, emerging markets analyst at Credit Suisse. "There was
no significant market reaction. It seems that the market has not
paid too much attention to the arguments that the rating agency
made yesterday. But of course, Ukraine continues to trade
extremely wide."
(editing by Peter Apps ad Toby Chopra)
