BUX rise limited by hints from government

A surge of Hungaryʼs PMI to 55.8 points in September from 51.0 in August lifted the Budapest bourse, although a subindex signaled a fall in employment for the first time since April.

But later on, just MOL kept the BUX above the waterline almost singlehandedly, while other blue-chips mostly fell on lacklustre manufacturing data abroad that pointed to continuing global slowdown, and as it turned out that a subtle war between Hungaryʼs government and local banks was far from over.

Oil company MOL got a strong shot in the arm from Gulf Keystone Petroleum, operator of the Shaikan block in Iraqi Kurdistan, which said it had now "greater certainty" of extracting more proved and probable reserves at a lower cost. According to the updated report, proved and probable reserves increased by 114% to 639m stock tank barrels gross.

MOL has a 20% stake in the Shaikan block.

This follows a report by MOL on September 8 in which it "significantly reduced" the geological potential of another of its ventures in Iraqi Kurdistan, the Akri-Bijeel Block, and said it would minimise investments there. MOLʼs share was mostly subdued ever since the early September report which added that write-downs of previous investments at Akri-Bijeel were expected to come in Q3 2015. Later, MOL also confirmed it would generally overhaul its investment policy.

Meanwhile on Thursday the Hungarian governmentʼs cabinet chief said that Hungary might review an agreement signed with the European Bank for Reconstruction and Development (EBRD) to see whether commercial banks have increased their lending to the economy. The review of the February deal, which set out a cut in banksʼ windfall tax from 2016, would focus on whether banks have in fact loaned more to Hungarian companies, Janos Lazar told a conference in Budapest on Thursday. The agreement did not contain any conditions for the tax reduction. The government said in March it wished to sign agreements with banks under which they would raise lending in exchange for the reduction of the bank levy, but no such agreement has been achieved.

At several economic conferences this week, a host of analysts and domestic bank heads cited obstacles to increased corporate lending, including lack of creditable demand amid risks to growth, including waning competitiveness of Hungaryʼs economy.

Lazar also acknowledged that the government was scrambling for ideas in order to maintain economic growth above an annual 2%. Government thinking extends from transport investments to support for home construction and for businesses and local councils that are not eligible for EU grants, from development of electronic infrastructure to curtailing bureaucracy and boosting lending by state-owned financial institutions and saving cooperatives, he said, while he confirmed that Hungary would need at least HUF 2,000 bln in European Union funding next year to produce economic growth on a scale similar to this year, but only HUF 1,300 bln to 1,600 bln can be penciled in realistically.

Hungaryʼs annual economic growth has slowed to 2.7% in the second quarter from 3.5% in the first quarter.

OTP lost 0.65% to HUF 5,370 on turnover of HUF 1.67 bln from a preliminary HUF 6.48 bln session total, nearly a third short of the daily average this year.

MOL gained 2.21% to HUF 12,490 on turnover of HUF 3.02 bln.

Magyar Telekom slid 0.51% to HUF 388 on turnover of HUF 134m.

Richter rose 0.11% to HUF 4,460 on turnover of HUF 1.64 bln.

The bourseʼs mid-cap BUMIX went out 0.34% lower at 1,613.55.

Elsewhere in the region, WIG 20 in Warsaw was down 0.80%, while Pragueʼs PX fell 0.28%.

Western Europeʼs major indices were mixed ahead of their close on Thursday, with FTSE100 in London up 0.11%, DAX30 in Frankfurt down 1.76%, and CAC40 in Paris down 0.75%.