BUX rises further on tax hints

Riding the tidal wave of global mood after the Fed pushed back expectations of its rate rise late Wednesday, and after EU leaders said on Friday that Greece has agreed to establish a new reform plan to secure additional bailout funds, the Budapest parquet continued up, mainly on OTP and Richter, while other blue-chips saw some week-end profit taking.

Local mood was also supported by waiting for an expected outlook upgrade on Hungaryʼs junk rating by S&P later in the day, by certainty in a base rate cut by the National Bank of Hungary (MNB) next Tuesday, and by a speech of the National Economy Minister at a business forum.

Mihály Varga aired government intention -- partly restating earlier communications -- to lower VAT, introduce a single-digit personal income tax rate, and move the two corporate tax rates closer together, nearer to the present lower bracket of 10% before the end of the current government cycle in 2018. Varga confirmed that the special bank tax will be cut. He also hinted at the governmentʼs as yet "private" expectation that GDP growth this year should be much faster than the 2.5% official projection. He did not elaborate, though, on how the government would make up for a shortfall that could run into hundreds of billions of forints if all the tax cuts are implemented.

At the same forum Hungarian central bank Deputy Governor Ádám Balog said he "would not be surprised" if economic growth came in at 3.2% this year, sharply above the bankʼs December forecast of 2.3%.

Morgan Stanley is also very positive on Hungaryʼs economic outlook, expecting a GDP growth rate of 2.9% on-year in 2015 and 2.3% next year, with upside risks. In a note on Friday, the house said domestic demand was staging a comeback thanks to faster utilization of EU funds, an improving labor market, looser monetary policy and easing austerity. Vulnerabilities are also on the mend and Hungaryʼs current account surplus could reach 5% this year.

However, fresh statistics on Friday showed employment growth accelerated in the business sector in January, but annual wage growth significantly slowed compared to both December and January last year, counted with or without bonuses. The same pattern applied to the national economy as a whole, counted without foster workers who earn less than both the minimal wage and the subsistence minimum.

In a more sober mood, Erste Bank maintained its view that Hungaryʼs GDP might grow by 2.5% on the year, and average inflation may remain close to zero in 2015. In a note on Friday Erste also said Hungaryʼs sovereign debt could be upgraded to investment-grade category in the first quarter next year.

OTP surged 4.70% to HUF 5,100, the highest since August 1, 2011 on turnover of HUF 11.05 bln from a HUF 15.51 bln session total, 80% above of the daily average this year.

MOL fell 1.14% to HUF 11,705 on turnover of HUF 2.22 bln.

Magyar Telekom lost 0.26% to HUF 386 on turnover of HUF 456 mln.

Richter advanced 1.52% to HUF 3,950 on turnover of HUF 1.32b.

The bourseʼs mid-cap BUMIX went out 0.34% higher at 1,524.20.

Over the week, the BUX added 3.00% after a plus of 2.09% in the previous week.

OTP gathered 8.51% after rising 7.80% last week.

MOL dipped 2.17% after decreasing 0.29% the previous week.

Magyar Telekom rose 1.31% after sinking 3.30% last week.

Richter gained 2.36% after improving 0.49% over the previous week.

The BUMIX garnered 0.94% after dropping 0.39% last week.

Elsewhere in the region, WIG 20 in Warsaw was up 0.96%, while Pragueʼs PX gathered 0.23%. Western Europeʼs major indices were all up ahead of their close Friday, FTSE-100 in London 0.86%, DAX30 in Frankfurt 1.45%, and CAC40 in Paris 1.33%.