March 18, 2020 / 10:21 AM / 2 months ago

CEE MARKETS-Forint hits record lows, Warsaw stocks rebound after rate cut

    By Anita Komuves
    BUDAPEST, March 18 (Reuters) - The Hungarian forint hit a
record low versus the euro and most Central European stock
indexes extended losses on Wednesday as central banks and
governments in the region announced steps to ease the economic
damage from the coronavirus. 
    Borders were closed, businesses were ordered to shut down
and major factories announced production halts across the
region, confirming that the spreading of the virus will deliver
a serious blow to Central European economies. 
    Central banks and policymakers have been announcing interest
rate cuts and measures this week to inject liquidity in the
markets to help businesses. 
    The Czech central bank announced an emergency 50-basis-point
rate cut to 1.75% on Monday, which was followed by a 50-basis-
point rate cut to 1.0% by the Polish central bank on Tuesday.
The Polish central bank also announced a bond-buying program. 
    The Polish stock market rebounded after the central
bank decision on Tuesday and added to its gains on Wednesday, up
1.94% by 0850 GMT and outperforming other markets in the region,
which registered losses. The Polish zloty eased 0.15%
and traded at 4.485 to the euro.
    The Polish government is expected to announce a package to
support the economy later on Wednesday. 
    "The domestic financial market is influenced by the MPC
decision ... and expectations for the `fiscal bazooka' which the
government should present today," Bank Millenium said in a note.
    "In our opinion, the EUR / PLN exchange rate will fluctuate
around 4.50 in the coming days." 
    Hungary's central bank announced emergency steps on Monday,
widening the range of collateral it accepts from banks and
urging lenders to apply a loan-repayment moratorium for stricken
firms.
    The NBH announced more measures on Wednesday. It called on
domestic banks to impose a moratorium on repayments of household
loans and said that it was examining restarting of its mortgage
note purchases.
    The forint set a record low versus the euro at
349.80 as the market opened. Budapest's stock index
plunged 3.88%.
    "The upcoming monetary easing coupled with the challenging
environment for emerging market FX and risks assets should keep
CEE currencies under pressure in coming months," ING said in a
note. 
    "The tightly managed RON should continue to be the winner in
falling markets while CZK volatility will remain extra elevated
given the positioning-related moves in the currency and the risk
of CNB FX interventions. We also look for more HUF and PLN
weakness in coming weeks and months," it added.
    Prague's equities fell 2.96% on Monday and the crown
 was trading at 27.063 to the euro, up 0.19% on the
day. Czech lender Moneta Money Bank shares fell over
6% after it suspended its dividend policy. 
    The Czech central bank had said this week it expected banks
would refrain from dividend payouts.
    Romania's government was also expected to approve a package
of measures later on Wednesday worth almost 2% of GDP.
    The measures to be approved range from unemployment aid and
guaranteed lines of credit to postponing income tax payments by
some companies for up to two months.   
    The package is bound to further pressure the already
strained budget deficit, analysts say. 
   Before the virus outbreak Romania had been grappling with
swelling budget and current account deficits, while asset and
rating outlooks were pressured by generous fiscal measures
already approved ahead of this year's elections.
    
            CEE        SNAPSHOT    AT                         
            MARKETS               0950 CET            
                       CURRENCIE                              
                       S                              
                       Latest     Previous  Daily     Change
                       bid        close     change    in 2020
 Czech                   27.0630   27.1150    +0.19%    -6.03%
 crown                                                
 Hungary                348.8500  347.9400    -0.26%    -5.08%
 forint                                               
 Polish                   4.4853    4.4787    -0.15%    -5.10%
 zloty                                                
 Romanian                 4.8495    4.8500    +0.01%    -1.26%
 leu                                                  
 Croatian                 7.5800    7.5800    +0.00%    -1.78%
 kuna                                                 
 Serbian                117.5300  117.5800    +0.04%    +0.03%
 dinar                                                
 Note:      calculated from                 1800 CET          
 daily                                                
 change                                               
                                                              
                       Latest     Previous  Daily     Change
                                  close     change    in 2020
 Prague                   716.37  738.2300    -2.96%   -35.79%
 Budapest               30303.23  31525.60    -3.88%   -34.24%
 Warsaw                  1456.95   1429.28    +1.94%   -32.24%
 Bucharest               7303.54   7561.99    -3.42%   -26.80%
 Ljubljana                739.00    738.16    +0.11%   -20.18%
 Zagreb                  1409.22   1433.51    -1.69%   -30.15%
 Belgrade   <.BELEX15     654.81    655.93    -0.17%   -18.32%
            >                                         
 Sofia                    423.07    422.40    +0.16%   -25.53%
                                                              
                       Yield      Yield     Spread    Daily
                       (bid)      change    vs Bund   change
                                                      in
 Czech                                                spread
 Republic                                             
   2-year   <CZ2YT=RR     1.9490    0.0000   +272bps     -8bps
            >                                         
   5-year   <CZ5YT=RR     1.5670   -0.0430   +211bps    -16bps
            >                                         
   10-year  <CZ10YT=R     1.6840    0.0000   +199bps    -13bps
            R>                                        
 Poland                                                       
   2-year   <PL2YT=RR     1.4530    0.0000   +222bps     -8bps
            >                                         
   5-year   <PL5YT=RR     1.6410    0.0930   +218bps     -2bps
            >                                         
   10-year  <PL10YT=R     1.9790    0.1670   +228bps     +4bps
            R>                                        
            FORWARD                                           
                       3x6        6x9       9x12      3M
                                                      interban
                                                      k
 Czech Rep          <       1.02      0.52      0.46      2.31
            PRIBOR=>                                  
 Hungary            <       0.57      0.55      0.52      0.65
            BUBOR=>                                   
 Poland             <       0.90      0.85      0.80      1.50
            WIBOR=>                                   
 Note: FRA  are for ask prices                                
 quotes                                               
 ***************************************************          
 ***********                                          
 
 (Additional reporting by Luiza Ilie in Bucharest, Alan Charlish
in Warsaw and Jason Hovet in Prague; editing by Larry King)
  
 
 
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