Central European Stocks Tumble on Goldman Forecast, Fitch Cut

By Pawel Kozlowski

Oct. 17 (Bloomberg) -- Central European stocks dropped for a third day, led by financial companies, after Goldman Sachs Group Inc. lowered its economic forecasts for the region and Fitch Ratings reduced Hungary's foreign-debt rating.

Komercni Banka AS, the third-largest bank in the Czech Republic, fell 17 percent, the most since 1999. OTP Nyrt. slid to its lowest level in almost five years after HSBC Holdings Plc downgraded Hungary's largest bank on concern its loan expansion may slow and credit quality worsen. Bank Pekao SA, Poland's biggest bank, posted its steepest drop on record.

The NTX Index of 30 companies in the region retreated 4.9 percent to 945.71 at 4:42 p.m. in Vienna, the lowest in almost four years, even as stocks in western Europe rose after a two-day selloff. The Czech PX Index slumped 10 percent at the close in Prague, the biggest fluctuation among equity markets included in global benchmarks.

``We're facing a global recession and people have realized central Europe won't avoid its impact,'' said Martin Majdaniuk, who helps manage the equivalent of $3 billion at Baring Asset Management in London. ``Goldman's forecast revisions added fuel to the selloff.''

Hungary's BUX Index fell 2.4 percent, Poland's WIG20 Index lost 6.4 percent and Austria's ATX Index retreated 4.8 percent.

Goldman cited slowing growth in western European economies and turmoil on global markets as the reasons for lowering its projections. The Czech Republic's 2008 growth forecast was reduced to 4.3 percent this year from 4.4 percent, while the 2009 outlook was changed to 2.5 percent from 3.8 percent.

Komercni Plunges


The Hungarian economy will grow 2.2 percent this year and 1.5 percent next year, down from 2.3 percent and 2.5 percent in 2009, according to Goldman.

The Polish economy will expand 5.4 percent in 2008, compared with a previous forecast of 5.6 percent and 3.6 percent next year, down from 4.2 percent.

Komercni Banka lost 530 koruna, or 17 percent, to 2,510 in Prague trading. Erste Bank AG, Austria's biggest publicly traded bank, slid 2.77 euros, or 12 percent, to 21.22 euros in Vienna.

The Goldman report ``is the news that set it off,'' said Milan Lavicka, an analyst at Prague-based Atlantik Financial Markets AS. ``Investors got worried about growth in the region,'' and began selling Czech shares, he said.

OTP declined 150 forint, or 4.6 percent, to 3,150, extending this month's loss to 48 percent. HSBC cut its recommendation on the shares to ``underweight'' from ``overweight'' and slashed its price projection for the bank 62 percent to 3,500 forint.

`Negative'

Fitch lowered its credit-rating outlook for Hungary to ``negative'' from ``stable,'' citing the country's worsening growth outlook, external debt, current account gap and financing requirement. The Hungarian government today reduced its forecast for gross domestic product growth to 1.2 percent from 3 percent and is also working on an ``emergency scenario'' with no growth, said David Daroczi, a government spokesman.

Pekao, the Polish unit of UniCredit SpA, dropped 15.3 zloty, or 11 percent, to 127.4 while PKO Bank Polski SA, Poland's second-largest bank, slid 2.4 zloty, or 7.7 percent, to 28.6.

``Some people are speculating Poland may also be hit by the global banking turmoil as growth is slowing,'' said Artur Zareba, executive director of equity sales at Bank Zachodni WBK SA in Warsaw.

BRE Bank SA, majority-owned by Commerzbank AG, retreated 6.2 zloty, or 3.3 percent, to 184, while Getin Holding SA, the financial-services company controlled by Polish billionaire Leszek Czarnecki, declined 0.27 zloty, or 4.1 percent, to 6.3 after UniCredit downgraded the stocks to ``hold'' from ``buy.''

New World

Investor confidence in central and eastern Europe fell for the first month in three in October, led by Hungary and Croatia, on a worsening global economic outlook.

An index of investors' and analysts' expectations for the region over the next six months slid to minus 51.1 points in October from minus 30.6 in September according to the survey released today by the ZEW Center for European Economic Research and Erste Bank AG.

New World Resources NV, the Czech Republic's biggest maker of coking coal for steel producers, plunged 22 percent to 111 koruna, its lowest since debuting on the bourse in May, after U.K. Coal Plc, the nation's biggest miner of the fuel, fell the most ever in London trading after saying full-year output will ``significantly'' miss a previous target because wet weather curbed third-quarter production.

To contact the reporter on this story: Pawel Kozlowski in Warsaw pkozlowski@bloomberg.net