* Egyptian pound at 6-yr low; main index falls 3.7 pct
* Emerging stocks at 2-week high
* Belarus Eurobond extends losses
* Turkey local bonds, bank shares selloff
By Sujata Rao
LONDON, March 24 (Reuters) - The Egyptian pound hit a
six-year low on Thursday as investors fled the stock market for
a second day while Turkish bonds and stocks extended losses
after the central bank's surprise rise in reserve ratios.
The MSCI emerging markets index <.MSCIEF> was up 0.8 percent
by 1200 GMT, touching a two-week high. It tracked gains in
global equities on confidence that global economic recovery
remains on track and as investors shrugged off renewed concerns
about the euro zone crisis, the cost of rebuilding Japan and
tensions across the Middle East.
Eastern European stocks rose half a percent <.TRXFLDEEPU>.
In Egypt, blue chip stocks fell 3.7 percent to a two-year
low, extending losses after plunging 8.9 percent on Wednesday
when the bourse reopened for the first time since January.
The blue-chip index <.EGX30> has now lost more than 30
percent this year. The broader index <.EGX100> closed 0.9
percent higher after sliding 8.95 percent on Wednesday.
The losses renewed pressure on the Egyptian pound <EGP=>
which fell to as low as 5.9605 to the dollar, its lowest level
since January 2005. Analysts expect more weakness, especially as
the central bank earlier this month said it would let the pound
respond to market demand. []
"This is definitely a one-way trade," said Luis Costa, head
of CEEMEA FX and debt strategy at Citi. "I believe this is
heading to 6 per dollar ... the central bank sees no point in
leaning against the wind and depleting FX reserves further."
However, the central bank placed $1 billion in T bills, with
average yields dipping slightly versus last week to 11.99
percent. Yields at the end of 2010 were around 10.8 percent.
Costa said the euro's general weakness amid the growing
likelihood of a euro zone bailout for Portugal was likely to
weigh on broader emerging markets as well.
"I don't think this will start a new selloff but with the
euro under pressure it's not great news for central European
currencies," he added.
The euro <EUR=> rebounded from early lows on Thursday but
analysts said it faced risks with Portugal looking increasingly
likely to seek a bailout and European leaders unlikely to take a
decision on how to strengthen the euro zone bailout fund at a
summit starting on Thursday.
Emerging European assets were on firm ground on Thursday
with Hungary's forint up 0.3 percent <EURHUF=> against the euro,
off 10-month highs hit this week.
The forint has gained 1.5 percent this week after the
government's appointment of two new central bank board members
was not seen heralding rate cuts. []
The Czech central bank left rates on hold on Thursday
pushing the crown down slightly. []
Elsewhere in emerging Europe, Russian stocks jumped 0.6
percent to a two-week high <> and the rouble firmed
slightly against the euro-dollar basket ahead of an expected
rate rise on Friday <RUS=MCX>. []
BELARUS, TURKEY BONDS FALL
In nearby Belarus, growing worries about the country's
balance of payments situation extended a selloff in its $800
million, 7-year Eurobond issued in January <BY058361623=>.
The yield rose another 3.5 basis points to 12.09 percent,
almost 300 bps above the starting yield and investors are
speculating whether the country will seek funds from Russia or
the International Monetary Fund. Many investors though are
holding onto the bonds with few foreseeing a default.
Gabriel Sterne, debt strategist at brokerage Exotix, said
the 12 percent-plus yield compares favourably to that on many
distressed bonds elsewhere and noted Belarus' public debt
amounts to just 25 percent of GDP.
"At these yields it's becoming quite attractive. It's a
balance of payments crisis rather than a debt crisis and the
kind of asset that would appeal to distressed debt funds."
Turkish domestic bonds have fallen since the central bank on
Wednesday unexpectedly raised bank reserve ratios for the fifth
time since September. []
Benchmark two-year lira yields <TR2YT=RR> rose to 10-month
highs of 9.14 percent on Thursday, further flattening the yield
curve as the 10-year yield fell to 9.38 percent -- down 10 basis
points this week.
"These measures are really hitting banks which are shying
away from the TGBs on the short end. That's why the curve has
flattened so much, all the impact was felt on the short end
where the main holders are locals," Citi's Costa said.
"The curve is flattening now but you should prepare for
steepening ahead as Turkey will see a second reflation process
in coming months," Costa added.
The lira benefited from the central bank's hawkish tone,
hitting a two-month high against the dollar <TRY=>.
Turkey's benchmark equity index <>, which is dominated
by banking stocks, fell 0.6 percent as the banking index
<.XBANK> dropped more than 1 percent.
(Editing by Susan Fenton)
