By Sebastian Tong
LONDON, Feb 7 (Reuters) - Emerging stocks were weaker on
Thursday with disappointing company results from the U.S.
providing yet another sign of an imminent global economic
slowdown, while the Hungarian forint slipped to 16-month lows on
concerns over rising inflation and political instability.
Several Asian markets were closed for the Lunar New Year
holidays but emerging equities <.MSCIEF> drifted 0.77 percent
lower in line with weaker European and U.S. markets.
"The situation will be calmer today than yesterday with
China and other Asian markets closed today. But it is an uneasy
calm," said Nigel Rendell, senior emerging markets analyst at
RBC Capital Markets.
The credit crunch sparked by mass default on U.S. subprime
mortgages has dented company profits around the world, with
Deutsche Bank <DBKGn.DE> and Cisco Systems <CSCO.O> among the
latest corporate giants to post disappointing results.
Growing global risk aversion is steering investors towards
lower yielding, safe-haven currencies such as the euro and yen,
pressuring emerging currencies.
"The market is pricing down anything vulnerable and that has
a high yield and those currencies that are most vulnerable with
a spreading credit crisis, such as the rand and the forint,"
RBC's Rendell said.
The forint <EURHUF=> fell 0.56 percent against the euro from
Wednesday's close, languishing near the key 265 level amid
London-based selling ahead of an anticipated rate hike.
Analysts say the currency will continue to come under
pressure because of Hungary's dependency on short-term foreign
financing and its shaky governing coalition.
"The Hungarian economy, which probably grew by around 1.4
percent in 2007, has little support from domestic demand and
therefore is more exposed to a potential euro zone slowdown
compared to the rest of the region," said Citi analyst Eszter
Gargyan in a research note.
Underlining Hungary's political risks, the currency on
Wednesday slipped amid talk that Prime Minister Ferenc Gyurcsany
had resigned, but rallied after a top aide denied the rumour.
[]
"The Hungarian forint <EURHUF=> is catching up with weakness
in other currencies like the rand, the resignation rumour was a
trigger to release some risk," said Commerzbank emerging debt
analyst Luis Costa.
RAND, ISSUANCE OUTLOOK
Economic and domestic political concerns have also hit the
South African rand <ZAR=>, which slipped more than one percent
to 7.79 against the dollar.
The rand is already one of the world's worst performing
currencies, losing more than 11 percent against the dollar since
the start of the year.
The country's chronic energy crisis, its gaping current
account deficit and uncertainty over its political leadership
are expected to keep the currency under pressure.
[]
The high-yielding Turkish lira also fell over 1 percent
against the dollar to two-week lows.
Meanwhile, the Czech crown edged towards record highs
against the euro <EURCZK=> after the Czech central bank raised
rates by 25 basis points to 3.75 percent, as expected.
Romania's central bank, which is fending off inflationary
pressures, on Thursday warned that prospects for the leu's
appreciation could be hurt if sustained wage growth outpaced the
country's productivity. []
Sovereign debt spreads <11EMJ> recovered, tightening by 2
bps to 278 bps over U.S. Treasuries, as investors eye prospects
for sovereign debt issuance this year.
Gazprombank, the financing arm of Russian state energy firm
Gazprom <GAZP.MM>, is meeting with investors in London
[] while Jamaica is holding a road-show for investors
in Europe [].
(Additional reporting by Ibon Villelabeitia and Carolyn Cohn,
editing by David Christian-Edwards)
