BUX recovers from two-day fall

Equities reversed a fall and government bond yields fell in Hungary after Chinaʼs central bank said there was no basis for a further fall of the yuan after two days of sharp weakening.

Chinaʼs moves to weaken its currency this week triggered fears that global inflation and growth will be lower, rocking stocks worldwide.

In domestic news on Thursday, official data of the construction sector showed a large volume growth compared to a relatively low base a year ago, and volumes returned to a slight growth in monthly comparison in seasonally and workday-adjusted terms after two months of contraction. But the accelerating annual fall of both new orders and work to be done suggested increasing exhaustion, with total contracted volumes declining almost 50% from a year ago after an annual fall of a little more than 40% in May, and annual fall in new orders accelerated nearly four-fold from May.

Ahead of a first estimate on Hungaryʼs second-quarter GDP due early Friday, economic expansion is expected to have slowed in from a surprisingly robust first quarter, on slowing industrial output growth and the countryʼs lessening success at using up EU support funds, economists said in a Wall Street Journal poll. Second-quarter GDP growth is forecast at 0.7% on the quarter and 3.1% on the year, versus 0.8% and 3.5%, respectively, in the first quarter, the median average of ten analystsʼ forecasts showed.

Accelerating GDP growth through frontloading EU funding could be the aim of Hungaryʼs government when it will discuss next week the possibility to invite tenders in the 2014-2020 programming period for EU funds by June 30, 2017, instead of inviting tenders trough 2020 and beyond.

Hungaryʼs largest bank OTP is forecast to report unadjusted net profit at HUF 32.41 bln from the second quarter, a major swing from a net loss of HUF 153.15 bln a year earlier when OTP booked massive losses related to Hungaryʼs conversion of foreign-currency mortgages and risk costs related to exposure to Russia. Adjusted net profit is projected to have declined 16% to HUF 32.79 bln as lower risk provisioning is seen offsetting only about half of a fall in total income, reflecting pressure on net interest margins in Hungary and a depreciation of the Russian rouble against the Hungarian currency, according to a poll of 13 analysts conducted by OTP on Thursday. The earnings are due early Friday.

OTP gained 2.61% to HUF 5,849 on turnover of HUF 3.32 bln from a HUF 5.53 bln session total, less than two-thirds of the daily average this year.

MOL won 0.67% to HUF 14,370 on turnover of HUF 1.14 bln.

Magyar Telekom rose 0.74% to HUF 408 on turnover of HUF 115m.

Richter advanced 0.68% to HUF 4,420 on turnover of HUF 930m.

The bourseʼs mid-cap BUMIX went out 0.41% higher at 1,692.51.

Elsewhere in the region, WIG 20 in Warsaw was up 1.12%, while Pragueʼs PX improved 0.49%.

Western Europeʼs major indices were all up ahead of their close on Thursday, FTSE100 in London 0.08%, DAX30 in Frankfurt 0.79%, and CAC40 in Paris 1.21%.