LONDON Jan 28 Turkish stocks fell for a second day on Monday as investors worried about banks and the current account while Egyptian stocks dropped after the government declared a state of emergency.
Turkish stocks hit a record high on Thursday on the country's strong growth outlook, but fell 1.4 percent on Monday to 12-day lows.
"It's certainly our sense that the rally is probably a bit overdone. And that there are credit problems emerging particularly in the banking sector," said Neil Shearing at Capital Economics.
"We're still worried about the current account deficit. This might be the first sign that markets are getting a bit worried about that."
Investors were waiting for a teleconference from rating agency Moody's later on Monday to discuss Turkey "shifting closer" to investment grade..
Egyptian stocks fell 0.65 percent after the government declared a month-long state of emergency in three cities following violent protests against the leadership . The Egyptian pound tested a new record low.
Central European stocks in the Czech Republic, Poland and Romania saw losses and the broader emerging equities index fell 0.43 percent despite strong gains in Chinese stocks.
A 2.4 percent increase in Chinese equities was driven by comments from a central bank official which were interpreted as an admission that bank profits should be protected, as well as positive corporate data out on Sunday .
The Romanian leu fell 0.5 percent against the buoyant euro and the Polish zloty fell a third of a percent to 4.18.
"The PLN is tactically cheap and (we) would target a move to below 4.10 against the EUR. For the PLN to do well in the period ahead, we need to see reassuring news on the domestic macro front. We also think that the local curve needs to reprice monetary policy, where too many rate cuts are currently priced in," a research note from Societe Generale said.
The forint was broadly unchanged, with investors awaiting Tuesday's central bank meeting which is widely expected to deliver a sixth consecutive rate cut in a bid to help the Hungarian economy.