Riding the waves

The nascent stock markets of eastern and central Europe have demonstrated at least one thing this year: they are anything but immune to global financial turmoil.

The Prague Stock Exchange had the worst start in its 15-year history when it fell 3% in the first three days of 2008. In mid-May it is trading 12% lower than last November’s high. And fears over Romania’s current account deficit have sent the Bucharest stock exchange down by 20% on occasion.

Only Poland and Hungary’s stock markets have weathered the storm, having largely recovered their losses after taking a hit at the start of the year.

The prospects still don’t look too good. “The risk-return relationship for equities appears to be too unattractive over the short term,” says Gerhard Winzer, head of research at Raiffeisen International. “In our portfolio, we leave the neutral weighting on equities/bonds and...