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Friday, January 18, 2008

Estonian Property Shares Sell-off

It is very hard to know how to read this news in Bloomberg today:

Estonian builders and property developers, including AS Merko Ehitus and Arco Vara AS, tumbled in Tallinn trading on concern a global economic slowdown may deepen the decline in the Baltic real-estate industry. Merko Ehitus, Estonia's largest builder, dropped as much as 11 percent to 10 euros, the steepest decline this decade. It rebounded to trade 1.9 percent lower at 10.99 euros, the lowest level in almost thee years, by 1:30 p.m. Arco Vara, the only publicly traded Baltic property developer, fell 9.2 percent, its biggest-ever decline, to 1.08 euros. The price is a record low and is 56 percent below its initial public offering price in June last year.

Things are definitely wobbling all over the place at the moment. You need to keep a close eye on what is happening in the stock markets across the EU10 at the moment. Two days ago Bloomberg ran this story about how central european stocks now seemed to be entering a "bear" market:

Central European shares fell for a sixth day, led by OMV AG and PKN Orlen SA, the region's biggest refiners. Austria's ATX extended its drop from a July record to more than 20 percent, a common definition of a bear market.

The NTX Index of 30 companies in the region fell 4.2 percent to 1,716.37 at 1:08 p.m. in Vienna, heading for the lowest close in 10 months.

Austria's ATX Index lost 4.5 percent to 3,833.1, bringing the drop since closing at a record on July 9 to 23 percent. A bear market is widely defined as a decline of 20 percent or more in a 12-month period. Austria followed Poland, Singapore, Hong Kong, Sweden and Japan in entering a bear market after last year's U.S. subprime-mortgage collapse.

The mention of Austria is significant since the Austrian banks are the most exposed should there be any large correction in central and Eastern Europe (all those Swiss Franc and Euro loans). The sell-off continued today:

Central European shares declined for an eighth day, the longest losing streak in two months. Erste Bank AG, Austria's biggest, and Komercni Banka AS led losses.

The NTX Index of 30 companies in the region declined 1.6 percent to 1,694.69 at 10.32 a.m. in Vienna, heading for the lowest close in more than 10 months. The measure has lost 8.2 percent this week.

Austria's ATX Index dropped 1.7 percent, the Czech PX Index slid 3.3 percent and Poland's WIG20 Index retreated 1 percent. Hungary's BUX Index added 0.3 percent.

Benchmarks in Austria, Poland and the Czech Republic dropped more than 20 percent from last year's highs this week, the common definition of a bear market, amid concern that the U.S. will enter a recession.

Erste Bank slid 2.1 percent to 39.05 euros today, while Komercni Banka, the third-largest in the Czech Republic, slumped 4.3 percent to 3,496 koruna. Raiffeisen International Bank Holding AG, Russia's biggest foreign lender, lost 1.6 percent to 79.68 euros.

Telekom Slovenije d.d. fell 1.9 percent to 340.20 euros. The shares have dropped 10 percent since Jan. 14, when the Slovenian government extended the auction of a 49.13 percent stake in its national phone company for a third time, with two bidders left.

The Romanian Leu continues to wobble, and as I note on my Romania blog perhaps the most ominous quote in the press on Romania at the moment is the following one, since it indicates that central bank policy may now become increasingly driven by the need to stem a collapse in the currency, rather than by a need to regulate internal demand conditions. If confirmed, this tendency would not be a positive one.

``Our rough calculations suggest that the main rate should be above 9 percent to fend-off the pressure on the leu,'' said Ilker Domac, an economist at Citigroup Inc. in Istanbul, adding that he expected another 50 basis-point increase in February.

Also I have a summary of the latest construction news from Hungary, together with a brief assessment of where we are in real economy terms there right now.

Basically I think we are all only waiting at this point to see who is actually going to be the first through the door.

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