Portugal outpaces skittish European bourses in relief bounce
* Portugal''s top index rises 0.9 pct after Thursday''s slump
* FTSEurofirst 300 up flat, posts steepest weekly loss since
March
* BES down 3.9 pct after update but not seen affecting other
banks
* FTSEurofirst set for worst weekly fall since April
By Francesco Canepa
LONDON, July 11 (Reuters) - Portuguese shares bounced on
Friday, outperforming skittish European markets, as investors
decided concern over Portugal''s biggest listed bank were
unlikely to disrupt thecountry's financial system and affect
lenders across the euro zone.
Banco Espirito Santo said late on Thursday losses
associated with the founding family and its holding company
would not affect the bank. That calmed investor worriesabout a
chain reaction hitting other banks, especially in the euro
zone's periphery. [ID:nL6N0PL63V]
Lisbon's PSI 20 index was up 0.9 percent by 1430
GMT. The pan-European FTSEurofirst 300 index was flat
at 1,350.06 points,down 3.1 percent on the week, its steepest
weekly loss since March.
Doubts about the financial health of the family who controls
BES had pulled Portugal''s PSI share index to a
nine-month low on Thursday and rocked bourses across Europe.
"While the bank has some exposure to the holding company,
over a billion euros, it's very clear that they have enough
excess capital, over 2 billion euros," said Veronika Pechlaner,
who helps manage $13 billion of assets at Ashburton Investments.
"So the systemic risk to the Portuguese banking system is
limited, and that's what the market is telling you."
The fall in the previous session came after shares and bonds
of Espirito Santo Financial Group (ESFG) , the chief
shareholder in BES, were suspended over "material difficulties"
at parent firm ESI.
Shares in BES opened for trading late on Friday morning and
were down 3.9 percent lower in volatile trade, as investors
factored in the bank''s newly releasedestimates about its
exposure to ESFG.
"(The announcement is) negative, as the overall direct and
indirect exposure (including guarantees) is circa 850 million
higher than the numbers mentioned before," analysts at
Portugal''s BPI wrote in a note.
"Still, we welcome the additional visibility provided with
yesterday's release on the group's exposures which should help,
though there was no clarification on whether there are
provisions made on these exposures."
An initial bounce inequity indexes across Europe fizzled
out in the afternoon as recent, weak industrial output data
earlier this week and the lingering uncertainty regarding
Portugal made investors reluctant to dip back into the market.
"After what we've seen thisweek, with the Espirito Santo
situation and the industrial production data, we're taking a
cautious approach here," Mike Harris, a partner at TJM Partners,
said.
"The question here is whether we're shifting from a buy-dips
mentality to sell therally."
Trading volume on the FTSEurofirst 300 was thin at less than
60 percent of its full-day average for the past three months.
Europe bourses in 2014:
European bourses' performances in 2014
Asset performance in 2014:
Asset performance in 2014
Today''s European research round-up [RCH/EUROPE]
(Additional Reporting By Andrew Winterbottom and Lionel
Laurent)
((francesco.canepa@thomsonreuters.com)(00442075423871)(Reuters
Messaging:francesco.canepa.thomsonreuters.com@reuters.net))
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