* Eur/dlr stop losses hit CEE currencies
* Stocks decline, led by Budapest as pension worries hit
* Cheuvreux recommends cutting Hungary exposure
(Updates prices, adds analyst, details)
By Jason Hovet
PRAGUE, Nov 26 (Reuters) - Budapest stocks hit a five-month
low and the forint lost 1 percent on Friday as Hungarian
government plans to change the pension system unnerved investors
in a region already struggling with the euro zone debt crisis.
The Polish zloty hit a four-month low and the Czech crown
fell to its lowest since August, tracking the euro -- emerging
Europe's reference currency -- as worries grew that Spain and
Portugal could eventually be forced to seek a bailout.
News from the region itself was dominated by Hungary's
centre-right Fidesz government's latest controversial policy
move since winning power in April. []
The centre-right government has given taxpayers until the
end of January to return to the state pension scheme or face
drastic cuts in future entitlements, a move that private funds
have denounced as "outright blackmail". []
Hungarian bond yields jumped by up to 40 basis points, the
forint hit a two-month low and the Budapest stock exchange
<> lost 4 percent, extending losses from Thursday.
"Today's moves are making people wake up to the fact that
bad and unsustainable policymaking is going on," Nomura
economist Peter Attard Montalto said.
Fidesz's first six months in power have also been marked by
attacks on the central bank and new taxes on banks and business
that have drawn criticism from the European Union, business
groups and analysts.
Cheuvreux recommend cutting exposure to Hungary.
"Given the complete unpredictability of the government's
decision-making process, we have decided to recommend moving out
of Hungarian assets, with the additional risk of ratings
downgrades bearing negatively ahead in our view," it said in a
regular morning note.
EURO ZONE DEBT ADDS TO LOSSES
Hungarian losses were worsened by a drop in the euro against
the dollar to a two-month low, which triggered stop losses and
knocked out some key technical levels.
The zloty broke its 200-day moving average around 3.98 per
euro and fell past the 4.0 level for the first time this month
before be capped at 4.05 level.
By 1219 GMT, the zloty <EURPLN=> bid down 1.3 percent at
4.034 to the euro and the crown <EURCZK=> was down 0.2 percent
at 24.761, but off a low of 24.825.
The forint <EURHUF=> hovered at 280 per euro. The Romanian
leu <EURRON=> was on the weak side of 4.30 per euro, down 0.2
percent from Thursday's close.
Concerns are growing that other highly indebted euro
periphery states such as Portugal or even Spain may need
bailouts after Greece and then Ireland sought emergency funds.
In central Europe, Hungary and, to some extent, Romania --
both who have needed external aid to get through the financial
crisis -- have been regarded as most vulnerable to risk aversion
associated with the euro zone debt crisis.
But the region was being sold across the board, with Polish
bond yields rising up to 9 basis points, mostly at the long-end.
"There's a risk, it is not the end of the weakening, as lots
of investors have long positions in the Polish bonds," said one
Warsaw-based dealer. "On the other hand, the current levels are
getting more and more attractive now."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 24.761 24.718 -0.17% +6.29%
Polish zloty <EURPLN=> 4.034 3.98 -1.34% +1.74%
Hungarian forint <EURHUF=> 280.00 277.27 -0.98% -3.45%
Croatian kuna <EURHRK=> 7.42 7.421 +0.01% -1.49%
Romanian leu <EURRON=> 4.309 4.299 -0.23% -1.66%
Serbian dinar <EURRSD=> 107.00 107.03 +0.03% -10.39%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +11 basis points to 83bps over bmk*
7-yr T-bond CZ7YT=RR +7 basis points to +90bps over bmk*
10-yr T-bond CZ9YT=RR +2 basis points to +98bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +6 basis points to +379bps over bmk*
5-yr T-bond PL5YT=RR +12 basis points to +375bps over bmk*
10-yr T-bond PL10YT=RR +12 basis points to +345bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +44 basis points to +660bps over bmk*
5-yr T-bond HU5YT=RR +37 basis points to +617bps over bmk*
10-yr T-bond HU10YT=RR +37 basis points to +547bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1320 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
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(Reporting by Reuters bureaus, writing by Jason Hovet;
Editing by Toby Chopra)
