The PX-50 index underwent another severe correction on Thursday as massive retail and, later, institutional selling occurred in the market. The index dropped 3.61%, with the biggest loser being Unipetrol with an over 8% drop; Komercni, CEZ, Zentiva and Cesky Telecom all lost over 4.0% of their values. We saw similar weakness across the whole emerging-market asset class, and currencies were also posting significant losses. As we said yesterday, the stellar year-to-date performance of the emerging European markets (Czech +31%, Hungary +42%, Poland +19%, Russia +42%,...) will certainly be inspiring many investors to lock in profits before the year’s end. Moreover, this pressure may trigger more selling from retail investors who have been very active players on these markets this year (their positions are however mostly leveraged through margins). Therefore we expect a few "dead cat" bounces (upward corrections) but negative sentiment may persist in the weeks to come.
PPI (September): Patria estimates 0.4% m-o-m, 1.2% y-o-y; market estimates 0.3% m-o-m, 1.1% y-o-y.