Polish stocks, bonds and currency pared losses following morning retreats in the European Union’s biggest emerging market triggered by Greece’s imposition of capital controls.
The WIG20 index declined as much as 3.7 percent, the most in 15 months, before recovering to a 1.5 percent drop at 4:09 p.m. in Warsaw. The zloty lost 0.5 percent to 4.1933 per euro after trading as much as 0.7 percent weaker. Thirty-day price swings on Warsaw’s main equity gauge jumped to the highest level since February while the zloty’s three-month implied volatility increased from a six-week low on Monday, according to data compiled by Bloomberg.
While European stocks tumbled after Greece shut its banks and imposed controls on capital, Polish banks are “stable” and the country has “large reserves” should the zloty weaken, Prime Minister Ewa Kopacz said Monday. The government has a cash cushion of about 60 billion zloty ($15.9 billion) and can avoid selling bonds on the market for “many months” if needed, Deputy Finance Minister Artur Radziwill said.
“After initial negative reactions to headlines from Greece, investors are rethinking the situation and calming down,” Marcin Mazurek, an economist at mBank SA in Warsaw, said by phone. “Most Polish assets have already sold off but high volatility will remain as the solution to the Greek problems won’t be easy or quick.”
Investors sold off local-currency debt, with the yield on benchmark 10-year government notes increasing 11 basis points to
3.35 percent, on track for the highest close since August.
“Polish authorities will be protective” of the zloty if they see “sharp” market moves, Gabor Ambrus, an economist at Royal Bank of Scotland Group Plc in London, said in an e-mailed note. The currency’s potential plunge to 4.30 per euro “would likely qualify for actual intervention,” he wrote.
Lenders and insurer PZU SA are “most exposed” to the Greek crisis among listed Polish companies as the financial market sell-off hurts their portfolios, said Dariusz Gorski, the deputy head of equity research at Bank Zachodni WBK SA.
PZU fell 2.2 percent, while the biggest Polish lender, PKO Bank Polski SA, retreated 2.3 percent. The WIG20 index dropped to 2,297.54 points, on track for the lowest close since Jan. 21.
Warsaw stocks will stay volatile, with the WIG20 above a “strong support level” at 2,200, Gorski said by phone.