Czech Stocks Lead Emerging-Market Losses as Bank Shares Plunge

Stocks in the Czech Republic tumbled to a seven-year low, leading losses in emerging markets, as the heavy weighting of financial companies pulled down the benchmark index amid investor caution before the Federal Reserve meeting next week.

The PX Index fell 3.2 percent as Prague-listed shares of Austria’s Erste Group Bank AG and two other finance-industry stocks, which together account for half of the 13-member gauge, exposed it to deteriorating global sentiment as investors braced for key meetings including MSCI Inc.’s market-classification review.

The measure has posted a 4.5 percent drop this week, the worst performance in the world after Greece and Zambia, while its 10-day volatility jumped to a three-month high. That marked a contrast from the start of the week when the weakest U.S. jobs data in almost six years boosted stocks amid speculation the Fed will postpone interest-rate increases.

Erste, which suffered losses in Hungary and Romania in 2014, slid for a third day after Uniqa Versicherungsverein Privatstiftung sold its 4.1 percent stake for less than the market price. The selloff accelerated on Friday as investors fled from stocks to the relative safety of government bonds on concern a series of key events later this month could renew turbulence in financial markets.

Power utility CEZ, which is trading without the right to its latest dividends since June 8, dropped 3.1 percent as Europe’s benchmark power futures slid for a fourth day.

“CEZ earnings are particularly sensitive to changes in electricity prices, and recent days have suggested the growing trend in the previous months may be reversing,” said Josef Nemy, an analyst at Komercni Banka AS in Prague who recommends buying the stock. “The ex-dividend day has provided a good reason for investors to take profit after CEZ previously outperformed the sector.”

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