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CEE MARKETS-Banks drive indices to new highs on Fed rate outlook
February 15, 2017 / 11:01 AM / 5 months ago

CEE MARKETS-Banks drive indices to new highs on Fed rate outlook

8 Min Read

* Budapest stocks touch record high, Warsaw a 17-month high
    * Bank stocks lead the rise after Fed hints at rate hike
    * Romanian inflation rises, central bank may tighten policy

 (Adds leu fall, trader comment, Polish rate setter)
    By Sandor Peto and Radu-Sorin Marinas
    BUDAPEST/BUCHAREST, Feb 15 (Reuters) - Budapest stocks hit a
record high on Wednesday as Central European equities rose with
other markets on the prospect of a possible Federal Reserve
interest rate rise next month.
    Fed Chair Janet Yellen said on Tuesday the Fed would
probably need to lift rates at an upcoming meeting, triggering a
firming of the dollar and a rise in global stocks. 
    Budapest's stock index had risen 0.5 percent by 1239
GMT, fuelled by gains in OTP, Hungary's biggest
lender, whose share price was at its highest since 2007.
    "It is driven by the general optimism (in stock markets)
rather than expectations for its earnings," said Marton
Medveczky, analyst of Equilor brokerage.
    Deputy governor Marton Nagy was quoted on Wednesday as
saying that the central bank would seek to reduce the cost of
housing loans to borrowers. He said the loans offered by banks
were still expensive and price competition was insufficient in
the banking sector. 
    "Looking at comments from the (Hungarian) central bank, that
would be negative rather than positive," Medveczky said.
    The central bank is also unlikely to react any time soon to
a rebound in inflation by lifting rates, which would help
commercial banks increase revenues.
    In Poland, the central bank is likely to maintain its
current wait-and-see stance until the end of the year,
rate-setter Grazyna Ancyparowicz said on Wednesday, adding rate
hikes may be needed afterwards. 
    In the latest evidence of regional inflation picking up
pace, Romanian data showed the first rise in the annual rate to
positive territory since mid-2015. 
    Value-added tax cuts and changes in the inflation basket
still keep the index relatively low but a further rise is
likely, which could trigger monetary policy tightening, ING Bank
analysts said in a note.
    "We look for a first step at the 3 July (central bank)
meeting, via a narrower standing facilities corridor," they
said.
    Bucharest's stock index rose 0.5 percent. 
    The leu eased a quarter of a percent to 4.515
against the euro.
    "The leu seems more vulnerable after recent central bank
suggestions there was almost no room for leu appreciation," one
Bucharest-based trader said.
    "Also, the president (Klaus Iohannis) does not rule out that
he might send back to parliament the (2017) budget which may be
seen as further fuelling political tension."
    The rise in regional stock markets was mainly driven by
banks.
    Prague's stock index touched a 14-month high, with
bank stocks rebounding after a fall on Tuesday as the ruling
party revealed a plan to levy a special tax on banks if it wins
upcoming elections. 
    Warsaw's bluechip index was flat. It touched a
17-month high before retreating as KGHM shed 1.4
percent after the copper producer announced a big writedown on
overseas assets. 
    
              CEE        SNAPS   AT  1339          
              MARKETS    HOT    CET           
                         CURRENCIES                
                         Lates  Previ  Daily  Chang
                         t      ous           e
                         bid    close  chang  in
                                       e      2017
 Czech crown             27.02  27.02   +0.0  -0.06
                            20     45     1%      %
 Hungary                 308.3  308.0  -0.09  0.15%
 forint                    500    800      %  
 Polish                  4.301  4.303   +0.0  2.38%
 zloty                       5      7     5%  
 Romanian                4.515  4.504  -0.23  0.44%
 leu                         0      5      %  
 Croatian                7.458  7.453  -0.06  1.30%
 kuna                        0      5      %  
 Serbian                 123.8  123.9   +0.0  -0.37
 dinar                     100    000     7%      %
 Note: daily  calculate  previ  close  1800        
 change       d from     ous    at     CET    
                         STOCK                     
                         S                    
                         Lates  Previ  Daily  Chang
                         t      ous           e
                                close  chang  in
                                       e      2017
 Prague                  969.6  966.3   +0.3   +5.2
                             4      2     4%     1%
 Budapest                33900  33724   +0.5   +5.9
                           .18    .52     2%     3%
 Warsaw                  2172.  2173.  -0.05   +11.
                            61     76      %    53%
 Bucharest               7648.  7609.   +0.5   +7.9
                            66     25     2%     5%
 Ljubljana               761.3  760.3   +0.1   +6.1
                             4      3     3%     0%
 Zagreb                  2169.  2168.   +0.0   +8.7
                            26     85     2%     4%
 Belgrade     <.BELEX15  708.8  703.5   +0.7  -1.19
              >              2      2     5%      %
 Sofia                   600.7  600.7  -0.01   +2.4
                             0      4      %     3%
                         BONDS                     
                         Yield  Yield  Sprea  Daily
                                       d      
                         (bid)  chang  vs     chang
                                e      Bund   e in
 Czech                                        sprea
 Republic                                     d
   2-year     <CZ2YT=RR  -0.58  0.022   +022   +3bp
              >              3           bps      s
   5-year     <CZ5YT=RR  0.236  0.127   +065   +12b
              >                          bps     ps
   10-year    <CZ10YT=R  0.607  0.075   +024   +7bp
              R>                         bps      s
 Poland                                            
   2-year     <PL2YT=RR  2.238  -0.02   +304  -2bps
              >                     1    bps  
   5-year     <PL5YT=RR  3.202  0.002   +362  -1bps
              >                          bps  
   10-year    <PL10YT=R  3.877  0.011   +351   +1bp
              R>                         bps      s
              FORWARD    RATE   AGREEMENT          
                         3x6    6x9    9x12   3M
                                              inter
                                              bank
 Czech Rep            <   0.26   0.27   0.33      0
              PRIBOR=>                        
 Hungary              <   0.38   0.53   0.66   0.24
              BUBOR=>                         
 Poland               <  1.782  1.812    1.9   1.73
              WIBOR=>        5      5         
 Note: FRA    are for                              
 quotes       ask                             
              prices                          
 **************************************************
 ************
 

 (Additional reporting by Luiza Ilie in Bucharest; Editing by
Alison Williams and Alexander Smith)

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