BUX follows global markets downwards
The Budapest Stock Exchangeʼs main BUX index finished down 2.45% at 20,717.92 Tuesday after rising 0.57% Monday. It is up 24.55% from year-end, after losing 10.40% last year.
The Budapest bourse gave in to pressure from global markets which suffered the double whammy of expectations for the Chinese economy to slow more ahead of preliminary Chinese manufacturing PMI data to be released on Wednesday, and late Monday speeches of several US Fed decisionmakers who all predicted, even urged, a rate hike still this year amid another batch of pessimistic data on home resales and manufacturing in the US.
In Budapest the fall was led by OTP Bank after the National Bank of Hungary (MNB) left its base rate unchanged in a widely expected decision on Tuesday while it switched to three-month deposits as its main policy tool as of Wednesday from the previous two-week deposits. The intention of the central bank is to boost local banksʼ demand for longer-maturity local-currency government bonds so that they can meet their reserve requirements, but the prospect is yet unclear as banks have short-term needs, too, and with the 1.35% base rate, the three-month central bank deposit presently yields about 1% point more than the three-month discount Treasury bill.
The market feels that, either through higher-yielding central bank deposits or longer-term government bonds, the state is increasingly syphoning off banksʼ funds which may limit their ability to lend to the real economy where loan demand is on the decrease anyway.
The adoption in parliament of a law on converting forex car and personal loans into forints may have also weighed on OTP.
Some of the costs of the conversion at a preferential exchange rate will be shared by the government, but this may, in turn, widen the budget deficit which has reached 103% of the annual target already by the end of August on fewer EU funds and extra expenditures related to the refugee crisis.
OTP dove 4.22% to HUF 5,226 on turnover of HUF 4.27 bln from a HUF 8.81 bln session total, less than 5% short of the daily average this year.
MOL lost 2.02% to HUF 12,605 on turnover of HUF 2.02 bln.
Magyar Telekom dropped 1.55% to HUF 381 on turnover of HUF 318m.
Richter retreated 1.41% to HUF 4,410 on turnover of HUF 2.15 bln.
The bourseʼs mid-cap BUMIX went out 0.53% lower at 1,610.32.
Elsewhere in the region, WIG 20 in Warsaw was down 2.09%, while Pragueʼs PX shed 1.61%.
Western Europeʼs major indices were all down ahead of their close on Tuesday, FTSE100 in London 2.43%, DAX30 in Frankfurt 3.56%, and CAC40 in Paris 3.28%.
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