October 11, 2019 / 8:32 AM / 3 months ago

CEE MARKETS-Politics dominate news, markets mildly positive

    By Marton Dunai and Jason Hovet
    BUDAPEST/PRAGUE, Oct 11 (Reuters) - Emerging European assets
opened on a mildly positive note on Friday as politics dominated
the news in most markets, with elections due in Poland and
Hungary, and the Romanian government falling after losing a
confidence vote.
    Poland, by far the region's largest economy, holds general
elections on Sunday in which the ruling Law and Justice (PiS)
party is expected to hold on to power, paving the way for
spending increases and likely continued friction with the
European Union .
    The fiscal impact of those measures has mostly been priced
in, so an albeit unlikely opposition victory would trigger a
sharp rally in Polish assets, Commerzbank said in a note to
    "Going with the major polls, our base-case is that PiS will
win handily and set up a majority government," it said. "Sharp
minimum wage hikes and spending increases will follow, driving
the fiscal deficit wider next year. Conflict with the EU will
continue in the background."
    Opinion polls show that conservative leader Jaroslaw
Kaczynski's PiS, a eurosceptic grouping with a nationalist tilt,
is likely to win a second term but may have to seek allies among
the opposition.
    Romanian Prime Minister Viorica Dancila's centre-left
government collapsed on Thursday after losing a no-confidence
vote in parliament, raising the prospect of prolonged political
uncertainty due to a fragmented opposition.
    A new cabinet will be elected in a Parliamentary procedure
but a new election is unlikely before next year.
    The leu has been stable, and Commerzbank said it
was unlikely to take a big hit as "changes in government really
are nothing new in Romania."
    "Further depreciation potential is likely to be limited...
there is now hope of a new direction being taken in politics, in
particular as regards fiscal policy, which would reduce the
potential for conflict with the EU."
    Hungary holds municipal elections on Sunday that may have
little impact on local assets - the ruling right-wing Fidesz
party is expected to maintain its dominance of municipalities
nationwide and of politics overall.
    Prime Minister Viktor Orban has had a two-thirds majority in
parliament - enough to push through constitutional changes - for
most of his decade in power, and even the strongest showing for
a broad opposition alliance would only dent that dominance
slightly. No general election is due until 2022.    
            CEE        SNAPSHOT   AT                         
            MARKETS              0946 CET            
                       Latest    Previous  Daily     Change
                       bid       close     change    in 2019
 Czech                  25.8300   25.8210    -0.03%    -0.48%
 Hungary               331.5500  332.3200    +0.23%    -3.16%
 Polish                  4.3048    4.3143    +0.22%    -0.35%
 Romanian                4.7595    4.7553    -0.09%    -2.22%
 Croatian                7.4275    7.4255    -0.03%    -0.24%
 Serbian               117.4000  117.5000    +0.09%    +0.77%
 Note:      calculated from                1800 CET          
                       Latest    Previous  Daily     Change
                                 close     change    in 2019
 Prague                 1005.46  997.2800    +0.82%    +1.92%
 Budapest              39695.92  39466.35    +0.58%    +1.42%
 Warsaw                 2130.28   2122.99    +0.34%    -6.43%
 Bucharest              9513.18   9479.50    +0.36%   +28.84%
 Ljubljana               866.12    870.11    -0.46%    +7.69%
 Zagreb                 1944.18   1940.56    +0.19%   +11.17%
 Belgrade   <.BELEX15    746.67    747.70    -0.14%    -1.97%
 Sofia                   558.51    557.44    +0.19%    -6.05%
                       Yield     Yield     Spread    Daily
                       (bid)     change    vs Bund   change
 Czech                                               spread
   2-year   <CZ2YT=RR    1.2500   -0.0040   +196bps     +0bps
   5-year   <CZ5YT=RR    1.0340    0.0090   +176bps     +2bps
   10-year  <CZ10YT=R    1.2470    0.0040   +174bps     +1bps
   2-year   <PL2YT=RR    1.5070    0.0030   +222bps     +1bps
   5-year   <PL5YT=RR    1.6850   -0.0250   +242bps     -2bps
   10-year  <PL10YT=R    1.9270   -0.0070   +242bps     +0bps
            FORWARD    RATE      AGREEMEN                    
                       3x6       6x9       9x12      3M
 Czech Rep          <      2.27      2.24      2.12      2.17
 Hungary            <      0.27      0.30      0.33      0.21
 Poland             <      1.73      1.70      1.68      1.72
 Note: FRA  are for ask prices                               
 (Reporting by Marton Dunai; Editing by Hugh Lawson)
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