BUX underperforms weak European peers

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The Budapest Stock Exchangeʼs main BUX index finished down 0.91% at 21,651.61 Tuesday after easing 0.01% Monday. It is up 30.16% from year-end, after losing 10.40% last year.

The Budapest bourse imported the soured mood from European markets after the European Central Bankʼs (ECB) October survey that showed euro zone banks had loosened their lending standards more than expected over the last few months dampened expectations for a widening of ECBʼs quantitative easing still this year. Another finding of the survey on companiesʼ demand for loans rising less than expected exacerbated the impact of the loss of hope for further ECB easing.

The National Bank of Hungary (MNB) left its record low base rate unchanged on Tuesday, and inaction by the ECB would allay pressure on it to resume rate cuts even next year, analysts say. This also weighed on the market on Tuesday. The MNBʼs statement on Tuesday suggested an unchanged base rate through the second half of 2017, at least a longer period of time without a rate hike than suggested in the central bankʼs guidance last month.

Also on the domestic turf, Economy Minister Mihaly Varga said on Tuesday that Hungary’s government was weighing the imposition of new taxes on companies that operate in Hungary but pay taxes elsewhere.

Fresh official statistics out on Tuesday showed annual wage growth of employed people in August had been the fastest since December last year, but the average wage fell for a fourth consecutive month in monthly comparisons calculated either with low-paid fostered workers included or not, raising doubts as to the future of household consumption in Hungaryʼs traditionally narrow market. The number of people employed under labor contracts in Hungary slightly grew for a fifth month compared to the previous month, but the annual growth in contractual employment decelerated for the third month in a row.

In the private sector, annual wage growth was the highest since June, but in monthly comparisons, the average wage also fell for a fourth month, and even steeper than in the national economy as a whole. Contractual employment in the private sector was flat from July.

The monthly average wage in Hungary was the equivalent of about EUR 510 in August, very low in European comparison. Meanwhile, the growth of home transfers from Hungarians working abroad significantly slowed from a year ago, central bank statistics show.

In company news, oil and gas company MOL announced its Slovakian subsidiary, Slovnaft, and its consortium partner, Hungarian Electricity Works (MVM), have decided not to pursue the acquisition of a 66% stake in Slovakiaʼs biggest electric energy company, Slovenske Elektrarne, from Italyʼs ENEL.

Drugmaker Richter on Tuesday announced the termination of the employment status of its commercial director.

CEO Erik Bogsch will supervise the companyʼs commercial activities until the appointment of a new director, Richter said.

OTP lost 1.66% to HUF 5,522 on turnover of HUF 3.71 bln from a preliminary HUF 8.23 bln session total, less than a tenth short of the daily average this year.

MOL fell 0.15% to HUF 13,230 on turnover of HUF 967m.

Magyar Telekom dropped 1.04% to HUF 382 on turnover of HUF 1.04 bln.

Richter retreated 0.75% to HUF 4,635 on turnover of HUF 2.38 bln.

The bourseʼs mid-cap BUMIX went out 0.56% lower at 1,607.85.

Elsewhere in the region, WIG 20 in Warsaw was up 0.27%, while Pragueʼs PX dipped 0.02%.

Western Europeʼs major indices were all down ahead of their close on Tuesday, FTSE100 in London 0.16%, DAX30 in Frankfurt 0.19%, and CAC40 in Paris 0.73%.

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