Eastern Europe stocks slump to five-year low
As EU rejects aid
Eastern Europe stocks plunged to the lowest in 5 1/2 years, led by banks in Hungary and Poland, after European Union leaders rejected pleas for special aid to the region, Bloomberg reported.
OTP Bank Nyrt. dropped 7 percent after Morgan Stanley lowered its price estimate for Hungary’s biggest bank. Bank Zachodni WBK SA slid 4.3 percent as the Polish unit of Allied Irish Banks Plc reported fourth-quarter profit that missed analysts’ estimates due to higher provisions. The MSCI EM Eastern Europe Index sank as much as 3.9 percent to 88.41, the lowest since August 2003, and was at 88.99 at 11:10 a.m. in London.
EU leaders yesterday vetoed an appeal by Hungary for 180 billion euros ($228 billion) of loans for eastern European countries, bowing to German concerns over budget deficits as the financial crisis escalates. Economies in the region need cash to repay foreign debt and arrest slowing growth rates which are putting an EU goal of a continent-wide free market at risk.
“The failure of yesterday’s summit to provide any fresh thinking about Eastern Europe’s crisis means that investors are faced this week with the prospect of ‘more of the same’,” said David Lubin, chief emerging-market economist at Citigroup Inc. in London.
The MSCI EM Eastern Europe Financials Index of 13 stocks dropped 4.5 percent to 198.18, the lowest in more than six years, extending its 12 month decline to 82 percent. Lithuania’s OMX Vilnius index slid 4.9 percent, while Russia’s Micex benchmark fell 2.7 percent after manufacturing in the country contracted for the fifth month.
The OMX Tallinn in Estonia fell 2.3 percent after the nation’s largest companies posted a cumulative net loss 450 million krooni ($37 million), compared with a profit of 1.23 billion krooni a year earlier, according to stock-exchange data and Bloomberg calculations.
European Commission President Jose Barroso said eastern Europe doesn’t need special treatment, noting that it can draw on 15.4 billion euros in the EU’s balance-of-payments assistance fund and will get 7 billion euros from a separate 11 billion euros in accelerated infrastructure subsidies. “We are one union, not two unions or three unions,” Barroso said.
The World Bank, the European Bank for Reconstruction and Development and the European Investment Bank last week announced loans of up to 24.5 billion euros for eastern European banks.
Hungary, Ukraine, Belarus, Latvia and Serbia have already been granted loans by the International Monetary Fund.