BUX slightly down in lacklustre trade

Taking its cue from most European markets, the Budapest bourse floundered in narrow range up and down the waterline throughout the day, finishing slightly down with blue chips paring losses or correcting some of the previous dayʼs falls.

Clear direction could not be found while outlooks are blurred and the summer holiday season keeps volumes low.

On the sunny side, Nomura said Hungaryʼs central bank would continue to loosen monetary conditions as much as possible even if it keeps its policy rate unchanged, as it has pledged. Monetary easing is likely to come in other forms, namely the central bankʼs cheap lending-for-growth program for SMEs, and the special funding program for banks, through interest rate swaps. It seems that Hungary has now adopted some flexibility over inflation, with the central bank able to hold rates steady as long as CPI remains in the 2%-4% range, Nomura said in a note on Thursday, expecting the main rate to remain unchanged throughout until much of 2017.

But Morgan Stanley warned of the dark side, pointing to the fact that emerging market central banks continued policy rate cuts weakened the ability of these markets to defend against the unwind of US quantitative easing, rising global interest rates and volatility. However, in a note on Thursday Morgan Stanley maintained its long-standing overweight stance on Indonesia, Hungary and Romania.

Locally, second reading data confirmed a slight acceleration of overall annual retail sales volume growth in May, but also confirmed that food and fuel trade volumes growth slowed sharply while inflation reappeared after eight months of deflation. The data revealed that overall retail trade fell in value terms in May from April. Inflation accelerated in June.

Thus, optimism was little boosted for household consumption by the Thursday announcement of the National Economic Ministry that Hungaryʼs government would soon decide about the conversion of forex car loans into forints. Banks might probably suffer some more from the measure concerning about HUF 300 bln of forex car loans, while the forced conversion of about HUF 3,000 bln of retail forex mortgages earlier this year still misses to encourage consumer demand despite high official hopes, analysts add.

Tuesdayʼs official data on quickly decelerating annual average wage growth in both the national economy and the private sector have already raised serious concern for the prospects of consumer demand. Average net wage in the national economy actually fell in May from the previous month.

OTP lost 0.67% to HUF 5,822 on turnover of HUF 2.55 bln from a HUF 4.78 bln session total, less than half the daily average this year.

MOL fell 0.59% to HUF 14,420 on turnover of HUF 1.02 bln.

Magyar Telekom won 0.25% to HUF 405 on turnover of HUF 778 mln.

Richter advanced 0.47% to HUF 4,300 on turnover of HUF 312 mln.

The bourseʼs mid-cap BUMIX went out also 0.26% lower at 1,678.93.

Elsewhere in the region, WIG 20 in Warsaw was up 0.57%, while Pragueʼs PX dipped 0.63%.

Western Europeʼs major indices were mixed ahead of their close on Thursday, with FTSE100 in London down 0.12%, DAX30 in Frankfurt up 0.05%, and CAC40 in Paris up 0.18%.