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BUX rides global rebound

Telco

The Budapest Stock Exchangeʼs main BUX index finished up 1.51% at 21,511.15 Thursday after dropping 0.93% Wednesday. It is up 29.32% from year-end, after losing 10.40% last year. Since a 6.46% fall on Monday, the BUX recuperated 3.53% by Thursdayʼs close.

The Budapest bourse rode a global rally after China fears temporarily abated on Chinese government measures to support shares, and following the biggest gains on Wall Street in four years on Wednesday after a US Fed policymaker said the case for an interest rate increase next month "seems less compelling" than it was a few weeks ago, and further big gains on Thursday on data of way above-expected US GDP growth in the second quarter.

The downward pressure on commodity prices should favor commodity importers in Central and Eastern Europe, Bank of America Merrill Lynch said on Thursday. The continuing easing by the ECB Bank would also favor lower rates in the region, it added.

Fresh data from the ECB on Thursday showed a further, albeit slow, recovery of corporate lending in the euro zone in July, attesting to initial success of the bankʼs expanded asset purchase program which, rounded out with the purchase of public sector securities, was started on March 9. Other ECB data suggested that the total asset purchase program was slightly ahead of its monthly EUR 60 bln target by August 21.

Nearer to the region, an agreement of Ukraine with its creditors to forgive a fifth of its debt and suspend repayment of the rest until 2019 also contributed to positive sentiment as most blue chips in the BUX are exposed to Ukrainian and Russian markets, mainly OTP Bank and pharma company Richter.

Legislation on the conversion of forex personal and car loans in Hungary could come into force from December 1 of this year, the National Economy Ministry said on Thursday.

Hungaryʼs government said last week it has decided after talks with local banks to convert outstanding forex car and consumer loans worth about HUF 305 bln into forints. The sum is relatively small compared to a nearly HUF 3,000 bln of forex household mortgages that were converted into forint debts earlier this year. The latest measure, to submitted to parliament next month, would cut the stock of forex retail loans to just 3% from 54% before the conversions started.

Borrowers would now get rebates worth some HUF 31 bln to compensate them for some of the exchange rate weakening, and the relief will be shouldered equally by the government and lenders, who will be allowed to reduce their 2016 and 2017 tax bills by a corresponding amount.

The manoeuvre is quite lender-friendly if compared to the spring conversion of forex mortgages and client refunds for past practices deemed unfair by retroactive legislation that cost banks about HUF 1,000 bln. The change in the governmentʼs approach reflects a commitment it made to EBRD in February to refrain from implementing new laws or measures that could hurt profitability of the banking sector, analysts say.

On the downside, contributing to underperformance of the BUX compared to European indices, a main source of growth in Hungary in recent years showed heavy signs of exhaustion as illustrated earlier by slowing GDP data in the second quarter. The number of public procurements fell by a fifth, and their value narrowed by a quarter in the first half of this year from a year ago, according to official figures published on Thursday. The drop reflects an almost 60% plunge in the value of tenders financed with EU funds.

The Acceleration Indicator of Hungaryʼs economy (GYIA), a measure of economic and financial indicators compiled by local business daily Vilaggazdasag, rose 2.74% in August from the same month a year earlier, showing additional slowdown in the pace of growth, the paper said on Thursday.

OTP won 1.77% to HUF 5,410 on turnover of HUF 4.88 bln from a HUF 8.46 bln session total, a tenth short of the daily average this year.

MOL gained 0.75% to HUF 14,100 on turnover of HUF 846m.

Magyar Telekom rose 1.54% to HUF 395 on turnover of HUF 261m.

Richter advanced 2.26% to HUF 4,260 on turnover of HUF 2.41 bln.

The bourseʼs mid-cap BUMIX went out 0.37% higher at 1,657.28.

Elsewhere in the region, WIG 20 in Warsaw was up 2.09%, while Pragueʼs PX soared 2.34%.

Western Europeʼs major indices were all up ahead of their close on Thursday, FTSE100 in London 3.61%, DAX30 in Frankfurt 3.48%, and CAC40 in Paris 3.75%.

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