RZB: Correction of Zloty and Forint to continue

Correction of PLN and HUF to continue

The sharp slowdown of the equity markets brought an increase in risk aversion and a depreciation of the CEE currencies. RZB\'S analysts expect that the correction will continue in the short run, but the fundamental situation is not comparable with the May/June 2006 correction, because in 2006 emerging markets fell, due to liquidity concerns. However, this time the US and European bond markets rose and therefore liquidity concerns are not in the market. However, the expectation of a slowdown in economic growth coming from the US will be priced into the markets in the coming days.

Analysts change their recommendation for PLN bonds from \"buy\" to \"sell\" in the short run (next 2-4 weeks) and are waiting for better opportunities to enter a renewed long position in the Polish market.

RZB\'s analysts would trade for a widening of the 10Y HUF-PLN spread (without currency hedge). They also expect that the 10-3Y spread of the Hungarian curve will increase from the current -79bp level.