BUX falls further on Greece, local worries

Telco

The Budapest Stock Exchangeʼs main BUX index finished down 0.36% at 21,799.82 Monday after falling 1.52% Friday. Over last week, it lost 2.01% after dipping 0.23% the previous week. It is up 31.06% from year-end, after losing 10.40% last year.

The Budapest parquet fell for a second day as the break-up of talks between Greece and its creditors on Sunday sent indices diving all over Europe.

But in line with Europe, the BUX also pared losses late afternoon after the head of the European Central Bank expressed his certitude in Greeceʼs readiness to pay off debt "fully and timely", and fresh data on a slippage in US industrial production in May helped stabilise US rate cut expectations that have tilted to an early hike last week.

Locally, data out Monday showed annual output growth in Hungaryʼs construction sector decelerated in April, and month-on-month trend turned into a fall, with practically only civil engineering supporting the sector. But steep annual falls of order stock and news orders in all construction segments augured for even tougher times ahead.

The data came on top of figures last week that showed similar slowdown in retail trade and industrial production.

Coupled with returning inflation due to fuel and food prices, the figures point to growing difficulties in maintaining household consumption, a key to any sustainable economic growth which could support a healthy stock market on the long term, analysts say, and add that a possible rise in utility tariffs could further diminish householdsʼ ability to buy.

Economic news portals aired on Monday a letter of Hungaryʼs government to the European Commission that apparently showed the government was preparing amendments to pricing methods in household energy supply which could help fend off an infringement procedure against Hungary on the matter, but could also make energy more expensive to households. Earlier in the year, the European Commission said it was inadmissible that utility companies in Hungary could not, by law, account certain taxes among costs, and they were deprived of legal recourse against pricing regulations.

A mainstay of government policy for years, mandatory energy tariff cuts could be turned back now as foreign service providers, Germanyʼs E.ON and Magyar Telekom, and Franceʼs GDF Suez among them, have been forced out of the household business by both taxation and the price regulations, and their business taken increasingly over by a new, state owned, utility company in Hungary, analysts say. However, access to cheaper resources for example through new interconnector gas pipelines in the region, the commissioning of which seems to be delayed until such time as the new, state-run, household utility service system is fully in place, may mitigate the impact, they add.

A Hungarian government spokesman said late afternoon that the government was ready to defend the results of the utility tariff cuts.

Heavily exposed to Eastern markets, pharma company Richter still could recover some of last weekʼs losses as a safe heaven choice and as the Russian ruble gained sharply against the Hungarian currency despite another policy rate cut un Russia.

OTP lost 0.83% to HUF 5,395 on turnover of HUF 5.40 bln from a HUF 7.70 bln session total, three-quarters of the daily average this year.

MOL dropped 0.52% to HUF 14,450 on turnover of HUF 761 mln.

Magyar Telekom slid 0.97% to HUF 409 on turnover of HUF 231 mln. 

Richter advanced 0.87% to HUF 4,390 on turnover of HUF 1.24 bln.

The bourseʼs mid-cap BUMIX went out 0.44% lower at 1,574.67.

Elsewhere in the region, WIG 20 in Warsaw was down 0.26%, while Pragueʼs PX dove 1.20%.

Western Europeʼs major indices were all down ahead of their close Monday, FTSE100 in London 0.77% DAX30 in Frankfurt 1.41%, and CAC40 in Paris 1.24%.

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