BUX down after good start


The Budapest Stock Exchangeʼs main BUX index finished down 0.80% at 21,900.53 Thursday after rising 0.47% Wednesday. Still in viewing distance form its latest nearly four-year closing high at 22,230.10 on Monday, it is up 31.66% from year-end, after losing 10.40% last year.

The Budapest parquet started the day with further upticks on ECBʼs Wednesday commitment to carry through its QE programme regardless of expected improvements in the euro area economy, but in the afternoon some sobering set in while Western indices fell on Greek worries and mixed company news.

Local worries also shackled the BUX, although one of their repercussions, the weakening of the forint, still put a floor under share prices.

The recent collapse of three Hungarian brokerages suggests the financial sectorʼs prospects and, accordingly, the lending environment may be less bright than thought early February when Hungaryʼs government, Erste Bank and EBRD signed an agreement which involved the government and EBRD taking equal minority stakes in Ersteʼs Hungarian unit, a government pledge to reduce the special bank tax from next year, and an understanding that Hungary would refrain from new laws or measures that may have a negative impact on bank sector profits.

The government would decide on legislation on the planned bank tax cut next week. But Hungaryʼs financial sector will face a new financial burden of around HUF 30 bln per year as the country tackles the fallout from the collapse of the three brokerages, central bank director Marton Nagy told Reuters on Thursday. Annual payments by the financial sector into deposit insurance fund OBA and investor protection fund BEVA will rise, and the extra amount, which the financial sector would have to pay over a period of maximum ten years, also includes payments into a special fund to compensate clients of bankrupt brokerage Quaestor. This latter may be deductible from the corporate tax.

Early February when the Hungary-Erste-EBRD agreement has been signed, Prime Minister Viktor Orbán said the government will "significantly" reduce the sectoral tax on banks in 2016-17, with further reductions to follow in 2018. He said that in 2016 the special tax would be reduced by a total HUF 60 bln.

The bank levy, introduced as a crisis tax in 2010, generated revenue of a little more than the HUF 144 bln target last year. This year, the target is the same.

An official announcement by the European Commission that it has suspended disbursement of some EU development funds to Hungary on "systemic weaknesses in the project selection system" also weighed on the market after data on Wednesday have already revealed a sharp slowdown in construction output growth.

Magyar Telekom outperformed after its AGM decided to increase the stock of treasury shares.

OTP lost 0.43% to HUF 5,763 on turnover of HUF 5.37 bln from a HUF 11.38 bln session total, a tenth above the daily average this year.

MOL dropped 1.10% to HUF 14,800 on turnover of HUF 4.72 bln.

Magyar Telekom rose 0.71% to HUF 428 on turnover of HUF 169 mln.

Richter retreated 1.98% to HUF 4,200 on turnover of HUF 977 mln.

The bourseʼs mid-cap BUMIX went out 0.34% higher at 1,587.11.

Elsewhere in the region, WIG 20 in Warsaw was up 0.86%, while Pragueʼs PX garnered 0.57%. Western Europeʼs major indices were all down ahead of their close Thursday, FTSE-100 in London 0.48%, DAX30 in Frankfurt 1.72%, and CAC40 in Paris 0.57%.

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