(Adds details, byline)
By Jason Hovet
PRAGUE, Oct 10 (Reuters) - The global asset selloff swept
through central Europe on Friday, pummelling stocks and
currencies as fears that the mounting financial crisis would
spill over into the region rattled investors.
Hungary's forint <EURHUF=> touched a two-year low and
Poland's zloty was down nearly 3 percent in early trade, while
stock markets in Prague and Budapest dropped more than 12
percent. Polish banks shed as much as 8 percent.
Investors shunned the region's bond markets, which ground to
a virtual halt as spreads widened.
The regional sell-off followed a steep drop in Hungary's
forint late on Thursday as concerns grew over the country's
financing and banking system amid the global financial crisis
and as the government said it would redraft the 2009 budget.
But market watchers chalked the falls up to a reaction to
steep slides in developed global markets.
"Basically it is the global backdrop. Global equities have
recorded heavy losses in the last 12 hours," said Martin Blum,
head of emerging markets economics and forex strategy at
UniCredit in Vienna.
"It's the combination of extreme global stress with
increased market focus on local vulnerabilities in that
environment."
The forint <EURHUF=> fell 3 percent to 266.5 against the
euro, while the Polish zloty <EURPLN=> was down the same amount
to 3.59 per euro by 0944 GMT.
The falls prompted assurances from the respective central
banks and government officials that the weakening wasn't due to
fundamentals.
"The Polish economy has strong and stable fundamentals.
Those remain unchanged," said Polish Deputy Finance Minister
Katarzyna Zajdel-Kurowska [].
Central Europe's banking system has stayed mostly insulated
from the financial crisis that has intensified in Europe and
forced Iceland to take control of its largest lenders.
On Friday, Austria's Erste Bank <ERST.VI>, a major investor
in the region, said it had 300 million euros in exposure to
Icelandic banks.
SELLERS ONLY
In eastern Europe investors have mainly flashed red flags
around Hungary and Romania, which are more exposed to foreign
credit than most of their ex-communist European Union peers.
Hungary's largest bank OTP <OTPB.BU> rejected a government
offer to guarantee all of its interbank loans. Financial
regulators were also investigating possible market manipulation
after OTP shares plunged 14 percent in late Thursday trade.
[] [].
In regional bond markets, trading in Hungary and the Czech
Republic dried up after recent lower liquidity forced wider
spreads. In more liquid Poland, activity was limited.
Romania's leu <EURRON=> fell more than 2 percent, before
cutting losses to 3.83 per euro to trade 0.6 percent lower, and
dealers cited an indirect central bank intervention.
The Czech crown <EURCZK=> hit a four-month low after
breaking above the key 24.95 per level, but then it recovered
some losses. By mid-morning it was 0.9 percent down from
Thursday's domestic close at 24.99.
Slovakia's crown <EURSKK=>, stable since July because it is
set to vanish in January when the country swaps it for euros,
was at 19-week lows, trading 1.2 percent down at 30.75 per euro,
from 30.4 on Thursday morning.
The crown's conversion rate for euro adoption was set at
30.126 per euro.
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2008
Czech crown <EURCZK=> 24.990 24.767 -0.90% +5.69%
Polish zloty <EURPLN=> 3.588 3.482 -3.04% +0.35%
Hungarian forint <EURHUF=> 266.500 258.750 -3.00% -5.40%
Croatian kuna <EURHRK=> 7.135 7.130 -0.07% +2.61%
Romanian leu <EURRON=> 3.829 3.806 -0.60% -6.95%
Serbian dinar <EURRSD=> 80.310 79.618 -0.87% -1.97%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +6 basis points to 46bps over bmk*
5-yr T-bond CZ5YT=RR -3 basis points to +59bps over bmk*
10-yr T-bond CZ9YT=RR -10 basis points to +48bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +13 basis points to +712bps over bmk*
5-yr T-bond HU5YT=RR +7 basis points to +676bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +508bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1144 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet)
