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CEE MARKETS-Leu falls on pension reform fear, Polish stocks rally
August 25, 2017 / 1:06 PM / 3 months ago

CEE MARKETS-Leu falls on pension reform fear, Polish stocks rally

    * Romania mulls downsizing private pension funds
    * Leu falls 0.3 pct, stock and bond market reaction muted
    * Warsaw's bluechip stock index highest since May 2015

 (Recasts with possible Romanian pension reform, Polish PM)
    By Sandor Peto
    BUDAPEST, Aug 25 (Reuters) - The leu hit two-month lows on
Friday after Romania's government said it may downsize private
pension fund contributions from next year, which could hurt
demand for Romanian assets.
    Romanian private pension funds invest mainly into government
debt, and partly into stocks. Earlier moves by the Hungarian and
Polish governments in the past few years to nationalise private
pension funds have weighed on local markets.
    Warsaw stocks, meanwhile, hit multi-year highs, benefiting
from healthy economic figures from Poland and Central Europe and
a positive sentiment in European markets.
    Romanian Prime Minister Mihai Tudose said his government was
analysing whether to cut contributions to mandatory private
pension schemes and redirect some of the funds into state
    The leu fell 0.3 percent to 4.598 versus the euro
by 1215 GMT, stopping just short of the 5-year low territory
beyond the 4.6 line.
    Reaction in the domestic bond and stock markets was muted as
there have been rumours about the pension fund plans in the past
days, and the Romanian government also has a track record of
zigzags in policy planning.
    Elsewhere, Budapest stocks traded just off the record
highs hit on Thursday.
    Warsaw's bluechip index, the best performer in the
region this year with 27 percent gain since 2026, rose 0.7
    It touched its highest levels since May 2015 and the
 index which also takes dividends into account set a
10-year high.  
    Polish shares are picking up after underperforming regional
peers last year when the policies of the conservative Law and
Justice Party, which took power in late 2015, hit various
sectors including banks.
    Its policies have become less painful to businesses, even
though Polish assets repeatedly came under pressure this year
from politics, including tension with Brussels over judiciary
reform and a plan to help FX borrowers at the cost of banks.
    Central Europe's robust economic performance still buoys its
currencies and equities. 
    Polish consumer confidence hit an all-time high in August
according to late Thursday's data.
    The zloty firmed slightly to 8-day highs against
the euro.
    It got support from comments by Prime Minister Beata Szydlo
that the government will not breach the European Union's budget
deficit threshold, 3 percent of economic output. Some investors
who sold the forint may have also bought zloty
instead, market participants said.
    The forint plunged one percent against the euro to a 2-week
low from a 28-month high on Thursday after the Hungarian central
bank flagged further monetary easing. 
    On Friday it eased 0.1 percent from its previous close, but
some dealers said good economic fundamentals could again lift it
               CEE MARKETS  SNAPSH   AT  1415 CET         
                            Latest  Previo  Daily   Change
                            bid     close   change  in
 Czech crown                26.088  26.106   +0.07   3.52%
                                 0       5       %  
 Hungary                    304.66  304.42  -0.08%   1.37%
 forint                         00      50          
 Polish zloty               4.2601  4.2622   +0.05   3.38%
 Romanian leu               4.5980  4.5836  -0.31%  -1.37%
 Croatian                   7.4150  7.4135  -0.02%   1.89%
 Serbian                    119.06  119.26   +0.17   3.60%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            Latest  Previo  Daily   Change
                                    close   change  in
 Prague                     1035.1  1034.1   +0.10   +12.3
                                 5       5       %      2%
 Budapest                   37898.  37954.  -0.15%   +18.4
                                20      41              2%
 Warsaw                     2474.1  2456.2   +0.73   +27.0
                                 6       7       %      2%
 Bucharest                  8384.8  8348.7   +0.43   +18.3
                                 1       6       %      5%
 Ljubljana                  826.56  828.68  -0.26%   +15.1
 Zagreb                     1898.3  1903.4  -0.27%  -4.84%
                                 0       7          
 Belgrade                   726.72  722.78   +0.55   +1.30
                                                 %       %
 Sofia                      712.56  718.44  -0.82%   +21.5
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
   2-year                   -0.021   0.005   +070b   -1bps
   5-year                    0.056   0.015   +035b   +0bps
   10-year                   0.901  -0.032   +050b   -6bps
   2-year                    1.735  -0.008   +246b   -2bps
   5-year                     2.64   0.016   +294b   +0bps
   10-year                   3.316   0.012   +292b   -1bps
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
 Czech Rep             <PR    0.61    0.72    0.81       0
 Hungary               <BU    0.19    0.25    0.31    0.15
 Poland                <WI   1.765   1.789   1.829    1.73
 Note: FRA     are for ask                                
 quotes        prices                               
 (Additional reporting from Luiza Ilie in Bucharest/Bartosz
Chmielewski in Warsaw; Editing by Alison Williams)

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