BUX falls in profit taking

Overdue profit taking set in after a six-day rally of more than 13% which accelerated on Monday on expectations of consumer- and business-friendly government measures in the wake of a by-election on Sunday that saw the far-right Jobbik party snatch a seat in parliament from the ruling Fidesz party.

Tuesday afternoon the dayʼs fall deepened after upbeat data on US retail sales and producer price rises suggested the Fedʼs incoming tightening should remain on track.

Locally, second-reading statistics conforming a slowdown of industrial production, a survey of the German-Hungarian Chamber of Industry and Commerce (DUIHK) showing foreign investors confidence in Hungary waning partly on unpredictable government policies, and legislation that offers full financial compensation to nearly all clients of a failed local brokerage, Quaestor, contributed to sobering in the market.

The "Lex Quaestor" will partly pass on the costs of the bailout to Hungaryʼs lenders just as they were preparing for a reduction in a punitive bank levy in 2016. According to the new law, a special fund would be set up to compensate Quaestor clients which could issue bonds to cover costs, and banks should also contribute. Analysts estimate the new burden on the financial sector around HUF 30 bln annually during six to eight years.

The legislation special to Quaestor clients also raised eyebrows as it does not concern the two other brokerages that also failed recently. The local media airs outcries for constitutional control, and suspects involvement of the official establishment in Quaestorʼs misdeeds.

Negotiations between the government and the Hungarian Banking Association go on as the legislation also poses a risk of breach of a February agreement with Erste Bank and the European Bank for Reconstruction and Development (EBRD). It involved the government and EBRD taking equal minority stakes in Ersteʼs Hungarian unit and a government pledge to reduce the special bank tax from next year, and Hungary has also agreed to refrain from new laws or measures that may have a negative impact on bank sector profits.

Central European consumer spending should grow by 2.5% to 3.5% this year and next on improving labor market conditions, healthier banks, lower oil prices and pro-growth government expenditure, but Hungary stands out with downside risks due to less supportive government spending and a fragile banking sector, Capital Economics said in a note on Tuesday.

OTP fell 1.41% to HUF 5,860 on turnover of HUF 15.68 bln from a HUF 26.07 bln session total, more than two and a half times the daily average this year. The share soared 13.09 in the previous five trading days to its highest close since July 4, 2011 on Tuesday.

MOL lost 0.68% to HUF 14,590 from its highest close since November 8, 2013, on Tuesday, on turnover of HUF 7.59 bln. It surged 20.76% in the previous seven trading days.

Magyar Telekom dropped 0.93% to HUF 426 from a two-and-a-half-year closing high on Tuesday, on turnover of HUF 544 mln. It rose 4.12% in the previous six trading days.

Richter dipped 1.46% to HUF 4,247 from a nine-month closing high on Tuesday, on turnover of HUF 2.03 bln. It won 13.42% in the previous six trading days.

The bourseʼs mid-cap BUMIX went out 1.24% lower at 1,567.11.

Elsewhere in the region, WIG 20 in Warsaw was down 0.40%, while Pragueʼs PX sank 0.49%. Western Europeʼs major indices were mixed ahead of their close Tuesday, with FTSE-100 in London up 0.19%, DAX30 in Frankfurt down 1.02 %, and CAC40 in Paris down 0.86%.