CEE MARKETS 2-Forint falls sharply on PM crisis tax comments

                                
 * Orban crisis tax comments hit forint; stocks recover
                                
 * Sentiment also hit by Irish, Portuguese yield spreads
                                
 * Romania, Hungary seen most vulnerable
                                
 
                                
 (Updates with forint move)
                                
 By Marius Zaharia
                                
 BUCHAREST, Nov 11 (Reuters) - Hungary's forint plunged to a
three-week low on Thursday, breaking through a key resistance
level after Prime Minister Viktor Orban said a continuation of
the "crisis tax" regime beyond 2012 was needed.
 Markets fear the taxes on companies from the banking or
energy sectors could limit their ability to invest or force them
to seek investment opportunities outside Hungary, thus impeding
its frail economic recovery.
                                
 The forint's move was exacerbated by thin trade caused by 
market holidays in Poland and the U.S. and some dealers said it
could reverse soon as the next key level at 277 looked hard to
break.
                                
 "(The forint's fall) is because of the talk about those
taxes," one Bucharest-based dealer said. "But volumes are low
and it is already recovering."
                                
 At 1033 GMT, the forint <EURHUF=> traded 0.9 percent down on
the day at 276.5 per euro, after having hit 277.04, its lowest
since Oct. 20.
                                
 "Losses accelerated after we breached 275," said a currency
dealer in Budapest. "It did not even pause at 276 although the
277 level seems to be holding it up for now."
                                
 The unit was unmoved by data showing Hungary's annual
inflation rose more than markets had expected to 4.2 percent in
October from September's 3.8 percent. [ID:nBUD005588]
                                
 Record yield spreads in debt-ridden Ireland and Portugal
kept appetite for central European assets low, with investors
fearing the negative sentiment in the euro zone could spread
towards more fiscally fragile states such as Romania or Hungary.
                                
 Romania's leu <EURRON=> and the Czech crown <EURCZK=> were
little changed from Wednesday's close.
                                
 The Polish zloty <EURPLN=> was 0.4 percent weaker, after it
hit its highest level in more than six months at 3.8715 in the
previous session.
                                
 
                                
 STOCKS RECOVER
                                
 Hungary on Wednesday confirmed that it plans to keep its
recently introduced windfall taxes on certain sectors of the
economy in place to a reduced extent until 2014, beyond a
previous plan to phase them out by 2012. [ID:nLDE6A90U9]
                                
 Budapest shares <.BUX> posted their steepest daily fall on
Wednesday since late May on the news. [ID:nLDE69O0VS]
                                
 On Thursday, Orban said Hungary will negotiate in 2012 with
banks, retail, telecom and energy companies about new taxes
[ID:nBDT000080].
                                
 While the Thursday comments renewed worries over Hungary's
long term outlook and pushed the forint through key technical
levels, stocks found strength to recover some of the previous
session losses to trade up 1.1 percent.
                                
 Market players are waiting for a news conference in which
central bankers will express their view on the Fidesz
government's 2011 budget.
                                
 "It is likely that the NBH (central bank) will provide a
critical assessment of the budget plans which could lead to HUF
vulnerability," BNP Paribas said in a morning note, adding its
long zloty/forint trade could find support in such comments.
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2010 
Czech crown      <EURCZK=>  24.613   24.611   -0.01%   +6.93%
Polish zloty     <EURPLN=>   3.905    3.89    -0.38%   +5.1%
Hungarian forint <EURHUF=> 276.5    274.12    -0.86%   -2.22%
Croatian kuna    <EURHRK=>   7.369    7.337   -0.43%   -0.81%
Romanian leu     <EURRON=>   4.281    4.276   -0.12%   -1.02%
Serbian dinar    <EURRSD=> 107.02   106.96    -0.06%  -10.41%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond   CZ2YT=RR   +12 basis points to  87bps over bmk*
7-yr T-bond   CZ7YT=RR   +2 basis points to  +94bps over bmk*
10-yr T-bond   CZ9YT=RR   +2 basis points to  +109bps over bmk*
All data taken from Reuters at 1133 CET.
Currency percent change calculated from the daily domestic 
close at 1600 GMT.
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(Reporting by Reuters bureaus, writing by Marius Zaharia,
editing by John Stonestreet)