Warsaw’s stock, bond and forex markets continued to fall on Monday with investors shipping out of emerging markets as the Greece crisis deepens.
Greece over the weekend imposed capital controls to stem a run on domestic banks, triggering fears across Europe that the country will fall out of the eurozone.
The Greek government said on Sunday night it had no other option after the European Central Bank froze its liquidity lifeline that had kept Greece going during the last six month run on deposits.
In London the FTSE 100 was down over 2 percent and French and German markets both fell 4 percemnt early on Monday. Banking shares were hardest hit, losing up to 10 percent.
Warsaw’s WIG20 index fell 2.4 percent to a five-month low of 2,276.85 at 9.30am, Bloomberg reported.
The zloty dropped 0.6 percent to 4.2008 to the euro, its weakest since 18 February, first thing on Monday. Against the dollar the zloty fell slightly to 3.78 and to the Swiss franc to 4.03 from 4.0 on Friday.
Meanwhile, the yield on benchmark 10-year zloty government notes jumped 13 basis points to 3.37 percent, the highest since last August.
On the equity markets last Friday the worst performers were Polish Oil and Gas Company (PGNiG), which fell 4.78 percent, power firm PGE Polska Grupa Energetyczna, down 2.37 percent and Poland’s largest bank, PKO Bank Polski, which was down 2.30 percent.
"There is talk of going back to the negotiating table with Greece, but belief in this solution is not great,” independent analyst Roman Przasnyski told Onet.pl, adding that the longer-term prospects were very unclear.
“From the zloty’s point of view the events of the last 48 hours are not favourable, and it could also come under pressure due to its emerging market status,” Konrad Ryczko from the Banku Ochrony Środowiska brokerage house said.
“Looking ahead, the zloty should be helped by fundamentals, rising inflation and the finance ministry and NBP’s promises to intervene in the markets if necessary. This doesn’t change the fact though that in the nearest few days investors may see the Polish market through the prism of risk associated with specific assets," Ryczko said.
“The Greek butterfly looks set to cause a tornado in financial markets,” Michael Hewson, chief markets analyst at CMC Markets UK, told The Guardian. “In the process we could well also find out if this event turns out to be the equivalent of the butterfly flapping its wings in New Mexico, going on to cause a hurricane in China.”
Greek PM Alexis Tsipras has called for a referendum on Greece’s creditors’ demands, which led to eurozone finance ministers to cut the country’s five-year bailout by the International Monetary Fund, the ECB and the European commission. Tsipras said Saturday’s move by the eurozone’s finance ministers was unprecedented and called it “a denial of the Greek public’s right to reach a democratic decision.” In the early hours of Sunday, parliament voted 178 to 120 in favour of holding the referendum.