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BUX corrects up on global bull run

Telco

The Budapest Stock Exchange's main BUX index finished up 0.80% at 17,449.50 Tuesday, after falling 0.42% Monday. It is down 6,00% from the end of last year, after it rose 2.15% in 2013. After the BUX has fallen for two days, improved global mood convinced investors to attempt a positive correction in the Budapest parquet, too.

Next year's tax law, though weighing on foreign companies and local consumers alike, was adopted in the Hungarian parliament Tuesday as expected, so it did not shackle the market any more.

Views on prospects in Hungary, remained mixed, however.

Hungary's household forex loan conversion will likely yield more positive results in the long run than negative ones, ING said in a note on Tuesday. Households' balance sheets are going to be cleaned of forex loans, thus the sector-wide deleveraging will come to a halt, exposure to forex rate fluctuations will also drop and the non-performing loan ratio may also decrease, due mostly to reduced monthly payments, ING said.

But the Hungarian government's latest regulations on the conversion of forex loans into forint debts opens up the possibility of foreign-owned banks exiting the country and selling their local units to the government, due to the lack of prospects for making a profit, Nomura said.

However, with Hungarian banks trading below book value and a government buyer unlikely to be generous, selling now isn't attractive. The party line being parroted by Hungary's remaining foreign banks - that they want to stay put - may be more than hot air, analysts said in Reuters' Breakingviews column.

Meanwhile, the European Union may put Hungary under fiscal scrutiny again next year based on the country's structural deficit, ING also said. ING expects Hungary's structural deficit to exceed its medium-term objective, which may result in a new excessive deficit procedure. Failing to meet the minimum linear adjustment requirement might result in a new EDP in spring 2015, ING added.

OTP won 0.35% to HUF 4,010 on turnover of HUF 1.78 bln from a HUF 4.11 bln session total, less than half the daily average this year.  MOL rose 2.07% to HUF 12,300 on turnover of HUF 912 mln. Magyar Telekom recovered 0.29% to HUF 343 on turnover of HUF 60 mln. Richter, which traders say is buying its own shares heavily, advanced 0.11% to HUF 3,700 on turnover of HUF 1.27 bln.

The bourse's mid-cap BUMIX went out 0.37% higher at 1,454.53. Elsewhere in the region, Warsaw's WIG20 was up 0.39%, while Prague's PX increased 1.30%. Western Europe's major indices were all up ahead of their close Tuesday, FTSE-100 in London 0.54%, DAX30 in Frankfurt 1.60%, and CAC40 in Paris 0.74%.

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