BUX falls further while bond yields rally


The Budapest Stock Exchangeʼs main BUX index finished down 0.88% at 22,196.60 Thursday, after sinking 0.60% Wednesday. It is up 33.44% from year-end, after losing 10.40% last year.

The Budapest parquet fell for a fourth consecutive day despite a global stock market downturn pausing on Thursday as its cause, the multi-week rally of best-rated sovereign yields, also abated in the euro zone. But in a belated follow-up, Hungarian yields still adjusted sharply up at the regular auction of longer-term Hungarian government paper.

While a long series of record-low yields seems to be over, the Thursday auction saw robust demand with fast-rising yields, suggesting that investors now find bonds more attractive than shares, whereas the appeal of the latter is anyway capped by mostly mediocre company results after quotations reached multi-month and multi-year highs in the run-up to the ECB QE, despite mixed assessments of Hungaryʼs economy.

But first-quarter Hungarian GDP came in on Wednesday decelerating in workday- and seasonally-adjusted terms, and forecasters stubbornly continued to project tougher times ahead.

Hungaryʼs economy is likely to sustain an underlying 2.5%-plus growth rate through 2016, which is an improvement over the recent historical average (but much slower than the 3.6% official figure from last year), Commerzbank said in a note on Thursday.

It forecasts that GDP will increase 2.7% this year, with risks to that depending very much on the momentum of the German economy (the growth of which has already slowed in the first quarter). Commerzbank holds a more conservative stance than the Hungarian government on household consumption recovery, which is being buoyed by low inflation, low utility prices and debt relief from foreign-currency borrower compensation, all of which it sees will incrementally add less to growth during the second half of this year.

On Thursday, the continuing weakening of the Russian rouble -- resulting from the Russian central bankʼs forex buying spree -- also contributed to the blues in the Budapest market.

Only Magyar Telekom gained on an announcement that Hungary will offer a five-year utility tax deferral from next year to telecommunications companies that are modernizing existing, or building a new, internet network.

The tax incentive will also be granted to utility companies as well, but only for the construction of a new network, such as power distribution and natural gas supply pipelines, but this did not enthuse the wider market as the measure might help public firms more than private ones while the government increasingly nationalises gas and electricity supply.

In general, however, corporates can not expect that their life will be made much easier in view of next yearʼs budget plan, analysts add.

OTP lost 1.50% to HUF 5,920 on turnover of HUF 2.79 bln from a HUF 6.54 bln session total, three-fifths of the daily average this year.

MOL fell 1.21% to HUF 14,710 on turnover of HUF 2.32 bln.

Magyar Telekom rose 0.96% to HUF 419 on turnover of HUF 349 mln.

Richter retreated 0.57% to HUF 4,350 on turnover of HUF 878 mln.

The bourseʼs mid-cap BUMIX went out 0.14% lower 1,608.83.

Elsewhere in the region, WIG 20 in Warsaw was down 1.01%, while Pragueʼs PX shed 0.89%. Western Europeʼs major indices were all up ahead of their close Thursday, FTSE100 in London 0.26%, DAX30 in Frankfurt 1.74%, and CAC40 in Paris 1.35%.

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