BUDAPEST: Central European currencies fell and stock markets plunged on Friday after Britain voted to leave the European Union, with the Polish zloty tumbling to a 4-1/2 year low against the euro and some stock markets to multi-year lows.
Direct trade linkages with Britain account for 3-6 percent of the foreign trade of central eastern European countries, with the euro zone having a much bigger role.
But Britain is still Poland's second-biggest export market, with its exports to Britain in 2015 at around 12 billion euros.
Investors in Central Europe have been worried that the impact of Britain's exit could be bigger if it leads later to cuts in the EU budget.
EU development funds play a big role in boosting economic growth in poorer EU states, so a reduction would be painful. There are also hundreds of thousands of east Europeans working in Britain.
"The big question is what happens to those who work there (in the UK)," said Janos Samu, an analyst at Concorde Securities in Budapest. "What hits us badly now is all this uncertainty."
"We see overall growth impact as biggest in (the) Czech (Republic) and then Hungary at around 0.5pp shaved off of growth under Brexit, Poland around 0.25pp and other countries minimal," Peter Attard Montalto at Nomura said in a note.
The zloty fell to 4.52 to the euro in early trade but recouped some of its losses by 0711 GMT, to trade at 4.456. The forint fell 1.7 percent to 320, but firmed back to 318.20 later in highly volatile trading.
Warsaw's WIG20 bluechip index touched a 7-year low, but later recouped some losses. The broader market WIG fell to a 5-month low. Prague stocks fell to a 7-year low.
Shares in Poland's biggest bank, the state-controlled PKO BP fell more than 10 percent in early trade, becoming the biggest drag on the WIG20 index.
The Bucharest stock exchange's blue chip index fell 4.5 percent to a four-month low. Budapest stocks were down 4.6 percent at a three-and-half-month low.
Poland's finance ministry has called off a switch treasury debt tender initially planned for Monday due to market volatility.
"I don't think the zloty could weaken further than 4.60 per euro," said Piotr Poplawski, senior economist at ING BSK in Warsaw.
"Due to our FX-loan problem we're very dependent on the SNB. The zloty has regained some ground just after they intervened and as long as they keep defending the franc the zloty should be relatively stable," he added.
He added he did not see a chance of a currency intervention by the Polish central bank in the near term.
Poland's deputy finance minister said the weakening of the zloty was not a risk to the Polish economy. He said he saw no reason to intervene on the currency market.
The National Bank of Hungary, which left interest rates on hold at a record-low 0.9 percent on Tuesday, said it was closely monitoring the British vote and related market developments and had all the necessary tools to continuously ensure financial stability.
The Czech crown, which is considered as a safe haven currency in the region, was relatively steady, easing only about 0.2 percent.
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