BUX up, slowed by European worries

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The Budapest Stock Exchangeʼs main BUX index finished up 0.63% at 22,285.04 Wednesday after rising 0.21% Tuesday. It is up 33.97% from year-end, after losing 10.40% last year.

In line with European peers, the Budapest parquet struggled to eke out another gain until afternoon, waiting for the evening vote in Greeceʼs parliament on the countryʼs new bailout program.

Late afternoon gains accelerated a bit, after Fed Chair Janet Yellen only repeated in a testimony to congress her earlier view that a rate hike was on the cards still this year. Thus, confounding lingering fears, she did not bring it any closer compared to similar market expectations despite strong US inflation and industrial data out Wednesday.

In view of the EU taming the Greek government, investors also pondered how much more the Hungarian government can challenge the community with its "unorthodox" policies after, late Tuesday, the Council of the EU definitively approved the latest country specific recommendations.

It said Hungary should achieve a fiscal adjustment of 0.5% of GDP towards the medium-term budgetary objective in 2015 and of 0.6% in 2016, and recommended reforms that would go against almost all basic tenets of government policy.

The recommendations include restoration of normal lending to the real economy, removal of obstacles to market-based portfolio cleaning, reduction of the contingent liability risks linked to increased state ownership in the banking sector, reduction of distortive sector-specific corporate taxes, removal of the unjustified entry barriers in the service sector, including in the retail sector, reduction of the tax wedge for low-income earners, strengthening structures in public procurement that promote competition and transparency, further improvement of the anti-corruption framework, and a reorientation of budget resources allocated to the public work scheme to active labor market measures while improving the adequacy and coverage of social assistance and unemployment benefits.

The Hungarian governmentʼs standpoint is that the European Commission has not considered new measures and information when it prepared the recommendations which were approved on Tuesday.

Separately, the European Commission on Wednesday said it opened two in-depth investigations into Hungaryʼs supermarket oversight fee and healthcare contribution payable by tobacco companies, and prohibited Hungary from applying the progressive rates until it concludes the assessment. The government expected around HUF 40 bln from the two levies this year, analysts say.

On top of Tuesdayʼs data attesting to swiftly decelerating industrial output, figures on Wednesday showed annual construction output growth also slowed sharply in Hungary while month-on-month fall accelerated in May. Steeply diminishing new orders and order stocks augured bad for the future, too.

MOL corrected up as it has introduced the latest in vehicle fuel price rises going on for the third week on the forintʼs depreciation versus the dollar, despite global prices continuing to ease.

OTP rose 0.82% to HUF 5,884 on turnover of HUF 4.93 bln from a HUF 7.29 bln session total, less than three-quarters of the daily average this year.

MOL gained 1.54% to HUF 14,520 on turnover of HUF 1.47 bln.

Magyar Telekom dropped 0.76% to HUF 393 on turnover of HUF 449 mln.

Richter retreated 0.02% to HUF 4,240 on turnover of HUF 363 mln.

The bourseʼs mid-cap BUMIX went out 0.27% higher at 1,662.13.

Elsewhere in the region, WIG 20 in Warsaw was down 0.42%, while Pragueʼs PX rose 0.77%. Western Europeʼs major indices were mixed ahead of their close on Wednesday, with FTSE100 in London down 0.06%, DAX30 in Frankfurt up 0.22%, and CAC40 in Paris up 0.26%.

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