BUX slides, but outperforms

The Budapest bourse fell for a third day on another global mini-meltdown and some dismal domestic forecasts and data, but still outperformed European peers as OTP Bank supported on a hefty target price raise.

Hungaryʼs Minister of Foreign Affairs and Trade, in a speech on Thursday, warned of dire consequences for businesses in Hungary in terms of transport and trade as "fractures" caused by the refugee crisis threaten the European Unionʼs passport-free Schengen zone.

The National Bank of Hungary (MNB) projected investments should grow temporarily faster this year than earlier expected, but saw an even steeper fall for next year, in its quarterly Inflation Report published on Thursday. Even this year, investments are supported but by the government and EU funds, while the performance of the corporate sector decreased in the second quarter, MNB acknowledged.

The MNB also reduced its projections for all measures of inflation.

It revised lower its projection for next yearʼs general government deficit, but mainly on the governmentʼs announcement in August that it would start the sale of at least 300,000 hectares of state-owned farmland this year. However, the sale is highly controversial as opposition parties and analysts see it as a gimmick to expand government level corruption.

Annual retail trade growth in Hungary accelerated in July for a third month calendar adjusted, but decelerated in actual, unadjusted terms even more than previously thought, with month-on-month seasonal and calendar adjusted growth also slowing, a second reading of official statistics showed on Thursday.

The Acceleration Indicator (GYIA) for September published on Thursday, a measure of economic and financial indicators compiled by business daily Vilaggazdasag, re-confirmed the continuing general slowdown in Hungaryʼs economy.

Meanwhile, JP Morgan raised OTP Bankʼs target to HUF 7,310 from HUF 6,950 on Thursday with overweight recommendation. The new target price is 37.5% above Thursdayʼs close.

JP Morgan calculated that as a result of smaller tax burden in Hungary, strong performance at home and in Bulgaria, the fizzling out of impact from government measures last year and this year, including the forex mortgage conversion and client refunds for past practices mandated by retroactive legislation, and recovery in the Russian and Ukrainian business should raise OTPʼs bottom line to HUF 157 bln next year and to HUF 204 bln in 2017, from an expected HUF 82 bln this year, as opposed to analystsʼ present average projections of HUF 95 bln this year, HUF 155 bln next year and HUF 195 bln in 2017.

OTP calculated its profit target for 2017 at a 12.5% Common Equity Tier 1 (CET1) capital requirement, while JP Morgan sees the ratio growing to 15.9% in 2017, raising the surplus capital to nearly HUF 250 bln, which OTP can spend on higher dividends, or own-share purchases, or medium-size acquisitions, JP Morgan said.

OTP Bank itself on Thursday dismissed speculation that it is interested in acquiring MKB Bank from the Hungarian state.

Magyar Telekom improved on a technical correction.

OTP won 0.76% to HUF 5,317 on turnover of HUF 2.39 bln from a HUF 7.26 bln session total, a fifth short of the daily average this year.

MOL lost 1.72% to HUF 12,015 on turnover of HUF 2.51 bln.

Magyar Telekom gained 0.26% to HUF 380 on turnover of HUF 291m.

Richter retreated 0.80% to HUF 4,446 on turnover of HUF 2.02 bln.

The bourseʼs mid-cap BUMIX went out 0.35% higher at 1,599.81.

Elsewhere in the region, WIG 20 in Warsaw was down 1.09%, while Pragueʼs PX sank 0.98%.

Western Europeʼs major indices were all down ahead of their close on Thursday, FTSE100 in London 1.28%, DAX30 in Frankfurt 2.25%, and CAC40 in Paris 2.40%.