16 de septiembre de 2014 / 17:54 / en 3 años

East European stocks coiled for catch-up, with Ukraine caveat

* East European stocks jumped 25 pct last time ECB did LTRO
    * Underperformance metrics have reached historic levels
    * East Europe performance gap link.reuters.com/bap82w
    * CEEU stocks LTRO reaction link.reuters.com/byq82w
    * East Europe P/Es vs EM link.reuters.com/zyn82w
    * EM 2014 FX performance link.reuters.com/jus35t

    By Marc Jones
    LONDON, Sept 16 (Reuters) - Eastern European stocks were the
surprise winners from the ECB's last flood of ultra-cheap cash
almost three years ago and could be again, albeit with investors
keeping a wary eye on events in Ukraine.
    A stampede this year into China, India and the Middle East
drove emerging market shares to overtake their
advanced economy peers back in June, just as the
deepening conflict in Ukraine rocked Eastern Europe's markets.
    That has pushed the performance gap between MSCI's main EM
index and its Russia-dominated eastern European one
 to its widest on record. 
    Even excluding Russia, regional stocks are
down more than 2 percent this year, according to MSCI, and based
on earnings estimates for next year, the region has never been
cheaper overall versus broader emerging markets.     
    So with Mario Draghi about to demonstrate his commitment to
getting the euro zone - eastern Europe's biggest trade partner -
back on track, some are wondering whether a rebound is due.
    Last time the ECB flooded markets with ultra-cheap cash back
in late 2011-early 2012, eastern European stocks 
jumped just short of 25 percent in 85 days. The correlation was
almost perfect and Draghi will start doing it again on Thursday.
    "For central and eastern Europe, Russia has clearly been the
issue," said Henning Esskuchen, head of regional equity strategy
for Erste bank, which operates widely in the bloc.
    "So if the ceasefire (in Ukraine) holds, and (Russia and the
European Union) are not bashing each other with further
sanctions, then we should have a good chance of closing that
performance gap."
    European leaders did introduce further sanctions on Friday
, but these had been anticipated.
    Shares in Poland, the Czech Republic, Hungary
 and Romania   have
dipped along with most global markets in recent days but are all
up over the last month. That contrasts with a near 2 percent
fall in MSCI's benchmark EM index. 
    A sell-off in the region's currencies has also eased with
the exception of the rouble. A bond market rally, spurred
by anxiety about Russia, has petered out. 
    Meanwhile some of the year's high-flying Asian markets and
others like Brazil, Turkey and South Africa have all had their
wings clipped by the Federal Reserve as it rolls towards rate
hikes. Details on that are expected this week.   
    Eastern Europe fared better than emerging markets overall
during the original round of Fed turbulence because it is more
closely aligned with the ECB due to its ties to the euro zone.
    Even so, economic growth is slow, banking problems dog many
countries and in Ukraine, the underlying problems are far from
being resolved. 
    Ukrainian President Petro Poroshenko accused Russia's
Vladimir Putin over the weekend of planning to destroy his
country as outbreaks of fighting continued to flare in eastern
    "Investors are not blind," said RBC Capital Markets head of
Emerging Markets Research Daniel Tenegauzer. "They know this
(the Ukraine crisis) is not going away any time soon."
    They also know that eastern European shares jumped 25
percent during the ECB's last round of cheap long-term funding,
5 percent more than emerging stocks overall and even
outpacing stocks from the euro zone itself. 
    Central and eastern Europe's central banks are also riding
in the ECB's slipstream, opening scope for market-supportive
rate cuts.
    Reuters polls show Poland and Romania are expected to cut
interest rates further in coming months. Hungary finished its
easing cycle in July after two years of cuts, but has pledged to
increase cheap funding for commercial banks.    
    Reuters data also shows Poland and Hungary have some of the
fastest improving company earnings. Asked whether he thought
eastern European stocks were coiled for a period of catch-up,
Societe Generale's Benoit Anne replied: "Definitely." 
    "I am quite bullish," he said. "Particularly in light of the
signals coming from the ECB... And anyone who is worried about
the situation in Ukraine has probably marched out already

 (Additional reporting by Vikram Subhedar in London and Sandor
Peto in Budapest; Editing by Ruth Pitchford)

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