BUX pares losses while Western markets rise quickens

After three days of decelerating rises the Budapest bourse turned south as Polandʼs probable shift to Hungary-like unorthodox economic policies after its Sunday elections fueled concern in the region, while Western markets also changed trend, but in the opposite, positive, direction in final positioning ahead of the US Fedʼs next guiding due Wednesday evening.

Fresh data on ever growing employment in Hungary did not catch the fantasy of investors while new government efforts to meddle in private business affairs made them wary.

However, the BUX pared losses ahead of close when euro area peers increased gains on a rarely seen set of better than expected company results of the day. Oil company MOL was still left seriously behind on weak fuel prices.

The average unemployment rate in Hungary fell to 6.4% in July-September, from 7.4% in the same period a year earlier and down from 6.9% in the preceding quarter and 6.7% in June-August, official data out on Wednesday showed. Employment rate grew to 56.6% from 54.8% a year ago and from 55.7% in the preceding quarter and 56.4% in the June-August period.

But analysts suspect the effect of low-paid seasonal work in the summer including temporary hiring of students, and generally point out the totally unreliable nature of the data as a whole, because figures are based on sample-taking for one week only in any three-month period, terming "employed" everybody who worked for money with or without a formal contract for at least one hour in the reference week. Numbers are also distorted by inclusion of fostered workers earning even less than the official minimum wage and people working abroad for less than a year.

Latest, more reliable statistics based on standard labour contracts show the number of people employed in Hungary slightly grew for a fifth month in August compared to the previous month, but the annual growth in contractual employment slowed for the third month in a row. Although the annual wage growth of employed people in August had been the fastest since December last year, the average wage fell for a fourth consecutive month in monthly comparisons calculated either with low-paid fostered workers included or not. In the private sector, annual wage growth was the highest since June, but in monthly comparisons, the average wage also fell for a fourth month, and even steeper than in the national economy as a whole. Contractual employment in the private sector was flat from July.

All this shows up in retail trade statistics: annual retail trade growth in Hungary sharply slowed for a second month in August in absolute terms, and also decelerated in calendar-adjusted terms, lagging the year-to-date average as well. Turnover growth slackened in all branches, i.e. trade of food, non-food, and automotive fuel goods.

Headline deflation returned to Hungary in September in both monthly and annual comparisons, while core inflation remained quasi unchanged.

Despite uncertain household income and consumption trends, businesses could, however, be slammed with legislation compelling retailers to employ at least one person per 70 sqm in all shops larger than 400 sqm. The relevant bill is soon to be introduced to parliament and could be in force already net year, in effect doubling payrolls at retail chains, newspaper reports on Wednesday showed.

The measure would afflict those, mostly foreign-held, retail companies that still struggle with the impact of the mandatory Sunday closure in force since March, analysts add.

Another, already approved legislation on a large widening of data companies can not withhold as business secrets in public procurement tenders comes into force on November 1.

Investors were also still digesting a hint from the National Bank of Hungary on Tuesday that it wanted to experiment with negative real interest rates soon, a policy that is fraught with risks to savings and investments through playing havoc in the financial system with banks either reining in assets growth for scarcity of liabilities, or luring deposits at their on expense, or both, losing profit either way.

Hungary apparently improved its ranking in a comparison of business regulations for domestic firms among 189 economies from the 54th place last year to 42nd this year, according to the latest "Doing Business" survey of the World Bank. But the World Bank has revised the methodology of ranking competitiveness, and according to the new methodology Hungary would have ended up at the 40th place last year.

OTP lost 1.25% to HUF 5,670 on turnover of HUF 2.27 bln from a preliminary HUF 4.82 bln session total, slightly more than half the daily average this year.

MOL fell 1.59% to HUF 12,990 on turnover of HUF 1.15 bln.

Magyar Telekom rose 0.78% to HUF 387 on turnover of HUF 221 mln.

Richter advanced 0.56% to HUF 4,877 on turnover of HUF 1.14 bln.

The bourseʼs mid-cap BUMIX went out 0.19% lower at 1,597.20.

Elsewhere in the region, WIG 20 in Warsaw was down 0.35%, while Pragueʼs PX shed 0.13%.

Western Europeʼs major indices were all up ahead of their close on Wednesday, FTSE100 in London 1.19%, DAX30 in Frankfurt 1.33%, and CAC40 in Paris 0.92%.