BUX down after strong weeks

Telco

The Budapest Stock Exchange's main BUX index finished down 1.18% at 17,870.65 Monday, after dropping 0.16% Friday from a near five-month high on Thursday. Over last week, it surged another 4.29% after rising 4.89% in the previous week. It is up 7.43% from year-end, after losing 10.40% last year.

Investors kept clear from the Budapest parquet, in view of crucial eurozone talks on Greece's debt later in the day, and breaches of a day-old ceasefire in Ukraine. Volumes were extra low compared to recent onslaughts as US markets were closed for Washington's birthday, a national holiday.

Besides the shaky ceasefire, Ukraine's downgrade by Fitch late on Friday also maintained concerns for OTP and Richter, heavily exposed to Ukrainian and Russian markets, while Russian president Vladimir Putin was due to visit Hungary on Tuesday.

Putin will discuss gas cooperation with Hungary a Russian presidential adviser told reporters on Monday in Moscow. Late last year, Russia scrapped the South Stream gas pipeline project citing EU objection, and named Turkey as its preferred partner for a future pipeline project.

Following the German chancellor's short Budapest visit early last week, Putin's visit would be scrutinised as the next episode in the Hungarian government's balancing act between East and West, analysts said.

MOL was down also on a weak fourth-quarter earnings report of its Croatian unit INA.

Meanwhile, despite a surprisingly strong 2014 preliminary economic growth figure at 3.5% in Hungary, analysts are still not very optimistic for the future, as opposed to government officials.

Hungary's economy minister said the country's 2015 growth rate could be higher than the 2.5% official forecast. Commerzbank says this is "probably too optimistic" in extrapolating strength from last year into this year. The house noted that although having stronger numbers on paper helps the government's case for a rating upgrade on top of recently announced bank tax cuts, growth momentum is to decelerate through 2015 as the flow of EU-projects and projects financed by the Funding for Growth Scheme of the central bank reach a peak.

Raiffeisen expects an upgrade of Hungary by the rating agencies from junk to investment grade within a year of the promised bank tax cut coming through. The government pledged legislation for the autumn in order to start cutting next year. This would mean lower debt servicing costs, higher demand for Hungarian assets, and also be handy in political communication. Furthermore, bank lending could revive, giving a much-needed boost to growth, which is set to slow easily otherwise to below 2% from last year's surprisingly high 3.5% increase, Raiffeisen said in a note on Monday.

OTP lost 1.03% to HUF 4,325 on turnover of HUF 2.35 bln from a HUF 3.02 bln session total, a third of the daily average this year.

MOL dipped 1.47% to HUF 11,725 on turnover of HUF 252 mln.

Magyar Telekom ended flat at HUF 372 on turnover of HUF 42 mln.

Richter retreated 1.88% to HUF 3,750 on turnover of HUF 190 mln.

The bourse's mid-cap BUMIX went out 0.17% lower at 1,496.62.

Elsewhere in the region, the WIG 20 in Warsaw was up 0.72%, while Prague's PX sank 0.52%. Western Europe's major indices were all down ahead of their close Monday, FTSE-100 in London 0.24%, DAX30 in Frankfurt 0.43%, and CAC40 in Paris 0.14%.

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