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BUX down on Magyar Telekom

Telco

The Budapest Stock Exchange's main BUX index finished down 0.38% at 18,638.28 Thursday, after rising 0.21% Wednesday to a more than two-month high. It is up 0.40% from the end of last year, after it rose 2.15% in 2013.

The main culprit was Magyar Telekom, diving after analysts interpreted background information from the company's CFO Wednesday evening as suggesting scarce dividend outlook and higher debt for the foreseeable future.

OTP was also under pressure as more and more financial institutions get their defenses rejected in lawsuits against their legal obligation to compensate clients for unilateral contract modifications in the past years. Pressure did not ease much even after the governing Fidesz party clarified that the transformation of forex debts into forint debts with additional burden on banks was not forgotten, but could hardly occur before next spring, and that mandatory compensation for contract modifications will, after all, not be extended for former clients who had repaid their forex debt under the government-imposed early redemption scheme in 2011, but they could sue banks individually if they feel hurt.

 Renaissance Capital said in a note that OTP was its "key sell" among central and Eastern European banks due to the Hungarian government's debtor relief programmes and the negative impact of the Russia-Ukraine conflict on OTP's subsidiaries there. Renaissance Capital sees OTP's target price at HUF 3,700.

However, news on progress towards a political solution of the Russia-Ukraine crisis supported MOL and Richter, also exposed to markets in the conflict zone, in spite of the decision of the EU to extend financial sanctions against Russia to include six state-owned oil and defense industry companies. But it came with a sweetener: the president of the European Council promised to withdraw sanctions if a review on the implementation of the Ukrainian peace plan at the end of this month makes it possible.

OTP lost 0.56% to HUF 4,400 on turnover of HUF 2.66 bln from a HUF 5.38 bln session total, a tad less than two-thirds of the daily average this year.

MOL gained 0.21% to HUF 12,130 on turnover of HUF 844 mln.

Magyar Telekom plunged 3.66% to HUF 368, an almost one-month low, on turnover of HUF 953 mln.

Richter advanced 0.87% to HUF 4,196 on turnover of HUF 817 mln.

The bourse's mid-cap BUMIX went out 0.26% lower at 1,517.08.

Elsewhere in the region, Warsaw's WIG20 was down 0.96%, while Prague's PX shed 0.26%.

Western Europe's major indices were all down ahead of their close Thursday, FTSE-100 in London 0.58%, Frankfurt's DAX30 0.18%, and CAC40 in Paris 0.33%.

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