* Hungary's forint falls as economic plans eyed
* Latvia lat dips; risk premiums up after deficit revision
By Sebastian Tong
LONDON, Oct 18 (Reuters) - Emerging shares suffered their
biggest one-day fall since mid-August on Monday as investors
cashed in on recent gains fuelled by expectations of further
U.S. monetary easing.
As Hungary unveiled new economic plans, the forint sagged to
its lowest in 2-1/2 weeks, while Latvia's lat weakened within
its tight trading range after revised figures showed its 2009
budget deficit exceeded the limit set out in its IMF-led bailout
plan. []
Federal Reserve chief Ben Bernanke's comments in a Friday
speech cemented the view that the Fed will soon embark on a
second round of debt purchases or quantitative easing to boost
the flagging economic recovery. []
"The point is that the Fed is taking deflationary risks
seriously...from a risk appetite perspective, that is
overwhelmingly positive," said Lars Christensen, chief analyst
emerging markets at Danske Bank.
"What we're seeing now is profit-taking on what has been a
very good run on most emerging markets," he said.
The emerging equity benchmark <.MSCIEF>, which has gained
over 20 percent since the start of June, was down over 1 percent
by 1150 GMT, while emerging sovereign debt <11EMJ> widened 2
basis points to trade 250 bps over U.S. Treasuries.
The start of the U.S. earnings season this week gave
investors another reason to cash in on the multi-month highs
seen recently across emerging markets.
South African shares <.JTOPI>, which touched a 27-month high
on Thursday, were flat while Russian shares <> slipped 0.3
percent, slipping further from last week's six-month highs.
Turkish shares <>, however, rose half a percentage
point to the all-time highs reached last week.
HUNGARY, LATVIA
Russia's rouble hit a nine-month low against its dollar-euro
basket <RUS=MCX> as it tracked oil prices <CLc1> lower, while
Poland's zloty weakened after advancing for three straight
sessions against the euro <EURPLN=>.
South Africa's rand slipped 0.8 percent against the dollar
as it came off a recent 33-month high, while the shekel was flat
against the greenback after scaling two-year peaks on Friday.
Hungary's forint fell about 1 percent against the euro
<EURHUF=>, while the cost of insuring its sovereign debt for
five years rose 8 bps as investors pored over the government's
plans to cut spending and revive the economy. []
Details that have emerged so far have unnerved investors as
they comprise unorthodox steps such as new taxes on certain
industries and the suspension of state transfers to private
pension funds.
"We've had leaks in the media, so the market is trading with
most of the information. The bottom line is that this is still
the weakest link in emerging Europe. The forint is going to
suffer a bit more than other currencies," said Luis Costa,
emerging markets strategist at Citi.
News that Latvia's 2009 budget deficit was revised to just
above the limit set out in an IMF-led bailout deal knocked the
lat to an 18-month low against the euro <EURLVL=> within the
tight trading range set by the central bank.
Five-year CDS on Latvia were 4 bps higher than Friday's
close, according to Markit.
(Additional reporting by Michel Rose; Editing by Hugh Lawson)
