BUX recovers further

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The Budapest Stock Exchange's main BUX index finished up 0.30% at 15,802.54 Monday after gaining 0.44% Friday. It is down 5.00% from year-end, after losing 10.40% last year. Last week it lost 2.88% — hitting a five-and-half-year low on Thursday — after falling 2.47% over the previous week.

The Budapest parquet continued to cautiously recover from last week's multi-year lows amid a flow of news pointing to a bumpy road ahead.

The special bank levy will be maintained, but could be lowered in the framework of an agreement with banks that invigorates lending, economy minister Mihaly Varga said in an interview published on Monday.

Expectations of a nearside rate cut by the National Bank of Hungary (MNB) receded further while governing Fidesz party chief whip Antal Rogán urged the MNB to increase its Funding for Growth programme. Rogán also said in an interview out on Monday that it should not be a matter of concern that after an over 3.0% GDP growth last year the Hungarian economy will grow by only 2.0-2.5% this year.

The European Bank for Reconstruction and Development (EBRD)on Monday forecast 2.4% GDP growth for Hungary this year instead of 2.2% seen in September, after last year's estimated 3.2%. Growth had accelerated last year in part because of the faster disbursement of European Union funds and a rise in households' disposable income due to government-mandated utilities price cuts, EBRD noted, and added that these temporary factors would no longer be relevant in 2015, while the external environment has deteriorated and a fiscal tightening "is imminent" in part because of the need to finance planned asset acquisitions.

Meanwhile, Russia's economy would sink 4.8% this year, and this, together with euro area slack, could knock the region where EBRD operates into a GDP fall of 0.3% on average, the first downturn since 2009, the bank said, adding that any further risks could hit countries in central and southeastern Europe, such as Poland and Hungary, although lower oil prices should help.

But an assistant state secretary at the prime minister's office, Nandor Csepreghy, said on Monday that Hungary planned to call in EU funds worth HUF 2,100 bln this year, and disbursements should exceed last year's annual record of HUF 1,863 bln due to streamlined procedures.

In a note, Bank of America Merrill Lynch forecast Hungary's GDP growth potential to be 1.5% on average in 2016-20, though this year and next the average growth rate could reach 3.0%. BofA/ML has found the greatest uncertainty regarding Hungary’s growth potential in the unforeseeable outcome of conflicts with the United States and the EU, as well as the deleveraging of multinationals. Hungary’s sovereign debt rating could be revised back to investment grade this year due to an improving debt mix, but household demand is risked by poverty. While poverty rates dropped meaningfully everywhere in the EEMEA region, Hungary was an exception in this respect, BofA/ML said.

OTP won 0.73% to HUF 3,580 on turnover of HUF 801m from a HUF 1.91 bln session total, a quarter of the daily average last year.

MOL lost 0.09% to another near six-year low at HUF 10,710 on turnover of HUF 585m.

Magyar Telekom improved 2.14% to HUF 334 on turnover of HUF 216m.

Richter retreated 0.99% to HUF 3,411 on turnover of HUF m.

The bourse's mid-cap BUMIX went out 1.12% higher at 1,423.18.

Elsewhere in the region, the WIG 20 in Warsaw was up 0.08%, while Prague's PX rose 0.19%. Western Europe's major indices were all up ahead of their close Monday, FTSE-100 in London 0.44%, DAX30 in Frankfurt 0.60%, and CAC40 in Paris 0.39%.

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