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BUX ends rally with slight correction

Telco

The Budapest Stock Exchangeʼs main BUX index finished down 0.40% at 22,394.59 Tuesday after rising 0.89% Monday. It is up 34.63% from year-end, after losing 10.40% last year.

Belatedly following West European markets that mostly fell for a second day, and underperforming regional markets that rose, the Budapest parquet snapped a six-day rally which took BUX to a more than three-month high on Monday.

On the domestic turf, annual inflation in Hungary came in at a higher-than-expected 0.1% in October on Tuesday, despite a very low base a year ago. September figure was a negative 0.4%. Annual core inflation accelerated to 1.5% from 1.3% in September. Analysts pencil in 1.2-1.5% annual headline inflation for December.

The quicker-than-expected return of consumer price inflation with accelerating producer price deflation up to September according to available data in the background reflects rather short supplies than increasing demand, while it might make it difficult for the National Bank of Hungary (MNB) to keep its base rate at the current record low level until up to the end of 2017 as it suggested in its latest guidance, analysts say.

Inflation in Hungary will likely hit the central bankʼs target of 3% by the start of 2017, and for that reason the monetary authority may need to consider raising interest rates sooner rather than later or risk denting its credibility, Erste said in a note on Tuesday. 

Financial institutions in Hungary refunded clients for past practices under retroactive legislation to the tune of HUF 734 bln this year by way of cash and debt service write-downs, the MNB said on Tuesday. It compares to a HUF 447 bln combined loss of Hungarian financial institution last year, the largest minus since 2003. They accumulated losses mainly on almost HUF 600 bln provisioning for the refunds. OTP Bank had a net loss of HUF 102.3 bln last year after net profit of HUF 64 bln in 2013. OTPʼs first half net profit was HUF 40 bln this year after a loss of HUF 146 bln a year ago.

Combined figures for financial institutionsʼ burden related to the conversion of forex household mortgages into forint debts since spring are not yet available.

The European Bank for Reconstruction and Development (EBRD) hopes that all parties will stick to their February agreement, an EBRD spokesman said on Tuesday. This follows the threat of Erste Group last Friday to withdraw from a February deal to sell a 15% stake in its Hungarian unit to the government. It said recent official considerations to impose increased lending as a condition for tax cuts, and mandating banks to cover compensations for clients of Quaestor, a Hungarian brokerage that went bankrupt earlier in the year, have put Hungaryʼs government on course to breach its agreement signed in February with the Austrian lender and EBRD to lower the special bank levy with no strings attached, and to refrain from measure that increase the banksʼ burden. Another 15% of Ersteʼs Hungarian unit is slated to be purchased by EBRD.

Oil group MOL opened a butadiene plant on Tuesday which is expected to lift its annual profit significantly, but at the same time HSBC trimmed its target price for MOL to HUF 19,300 from HUF 19,400 previously. However, the target price still contains a huge premium compared the shareʼs current price. HSBC affirmed MOLʼs "Buy" recommendation.

A relatively small amount of own-share purchase of Richter in OTC trades did not help its quotation on the parquet.

OTP lost 0.37% to HUF 5,667 on turnover of HUF 2.42 bln from a preliminary HUF 7.44 bln session total, nearly a fifth short of the daily average this year.

MOL fell 0.19% to HUF 13,375 on turnover of HUF 1.46 bln.

Magyar Telekom shed 1.02% to HUF 389 on turnover of HUF 436 mln. 

Richter retreated 0.40% to HUF 5,000 on turnover of HUF 3.07 bln. 

The bourseʼs mid-cap BUMIX went out 0.09% lower at 1,610.31.

Elsewhere in the region, WIG 20 in Warsaw was up 0.64%, while Pragueʼs PX rose 0.60%.

Western Europeʼs major indices were mixed ahead of their close on Tuesday, with FTSE100 in London down 0.34%, DAX30 in Frankfurt up 0.16%, and CAC40 in Paris down 0.04%.

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