Emerging stocks head for weekly loss

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London - The Hungarian forint hit 10-day lows versus the euro on Friday after poor economic data reinforced rate cut expectations while weakness in Asia took emerging equities to their lowest since early January.

Central European currencies failed to recover despite a buoyant IFO business sentiment reading in Germany.

The forint fell 0.6 percent, approaching recent 7-month lows as poor retail sales suggested the central bank could extend its rate cutting campaign. The Polish data on Thursday pushed the zloty to a 5-month low.

“If you look at Central Europe you see a lot of weakness... In Hungary we again had a batch of horrible numbers so with the exceptions of a few credits such as Turkey the picture is still very depressed,” said Luis Costa, head of CEEMEA FX and fixed income strategy at Citi.

“It's a very grey picture which reinforces that the currencies won't perform well.”

Central European stock markets in Warsaw and Budapest however inched up, benefiting from gains in Western Europe.

Broader emerging equities lost 0.3 percent trimming 2013 gains to just 1.2 percent and on track for the biggest weekly loss since mid-November. The losses were driven by weakness in Asia where currencies' strength against the yen and dollar is causing foreigners to dump shares.

But in emerging Europe, the rouble jumped half a percent to trade under 30 per dollar for the first time since May 2012, supported by local tax payments and inflows to local bond markets.

Russian stocks rose 0.7 percent while Turkish and South African equities slipped off record highs hit on Thursday.

Trading at around 9 per dollar, the South African rand remained close to April 2009 lows hit earlier this week.

“There is a risk of further weakness in the rand, especially as a weaker currency seems to be a desirable outcome for the central bank,” Societe Generale said in a note.

The rand was also supported by gains on South African bonds as buyers crept back after this week's selloff. - Reuters


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