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By Bloomberg

Polish stocks fell the most in four months and bonds retreated on concern opposition candidate Andrzej Duda’s election victory will upset political stability that helped achieve one of the best economic growth rates in Europe.

Government bonds yields climbed to the highest in two weeks after Duda defeated incumbent Bronislaw Komorowski in the presidential runoff. Warsaw’s WIG20 stocks index dropped the most since Jan. 15 as PKO Bank Polski SA, the country’s biggest lender, tumbled to a five-week low.

Duda’s win paves the way for parliamentary elections in the fall that may eject the only government in the European Union that led a country through the financial crisis without letting the economy slide into recession. He has vowed to raise benefits for families, reverse an increase in the retirement age and boost taxes on banks, plans that are now more realistic as his Law and Justice party vies for power in a general election due by November.

The outcome “increases political and policy uncertainty ahead of the more important parliamentary elections,” Michal Dybula and Marcin Kujawski, economists at Bank BGZ BNP Paribas SA in Warsaw, said in note Monday. “The erosion in confidence and another toll on the banking sector could be very detrimental for the economy.”

‘Something New’

The yield on 10-year zloty debt rose by seven basis points to 2.88 percent. The zloty weakened as much as 0.7 percent before trading little changed at 4.1079 per euro at 1:53 p.m. in Warsaw. The currency has weakened 1.5 percent since Duda won the first-round vote on May 10, making it the fourth-worst performer among 24 emerging-market currencies tracked by Bloomberg.

The banking industry, which is 62 percent foreign-owned, charges “too much” and burdens Poles with foreign-currency mortgages, Duda said last week. The nation should “gradually” buy back foreign-owned lenders, he said.

PKO Bank fell to the lowest since April 15, while Bank Zachodni WBK SA, controlled by Spain’s Banco Santander SA, lost 2.5 percent. The WIG20 index slid 1.3 percent to the lowest since April 20, erasing 5 billion zloty in market value.

Trading volumes were 35 percent lower than the 30-day average, according to data compiled by Bloomberg. Markets in the U.S. and U.K. were among those closed for public holidays on Monday.

As president, Duda will be able to veto legislation and act as commander-in-chief of the armed forces with a say in foreign policy. He’ll also choose the next central bank governor after Marek Belka’s six-year term runs out in June 2016.

“Local factors and political risk will be something new for the Polish bond market,” economists at MBank SA, led by Ernest Pytlarczyk, said in a note. “They may prove to be of great importance.”