BUX corrects up in global relief

Telco

The Budapest Stock Exchangeʼs main BUX index finished up 0.91% at 23,610.62 Wednesday after dropping 0.38% Tuesday. It is up 41.94% from year-end, after losing 10.40% last year.

The Budapest parquet followed Western markets upwards after conciliatory remarks from Russia and Turkey over the Turkish downing of a Russian fighter earlier in the week eased investors fears of geopolitical tension, and expectations for more ECB easing early next month cheered them up.

However, despite reaching a third four-and-a-half-year year high within a week on strong performance from safe heaven pharma company Richter, the main index lagged the pace of most Western peers – while overperformed in the CEE region – as OTP Bank will likely not be among winners of a second set of modifications to the special bank levy in force since 2010. OTPʼs share struggled to remain above the key HUF 6,000 level, while it is still near a seven-month high it reached recently.

A late-Tuesday government bill re-introduces the principle of linking bank levy reductions to increased corporate lending, but as an incentive rather than a punishment as proposed earlier by the National Bank of Hungary (MNB), which would have contravened the governmentʼs February agreement with the European Bank for Reconstruction and Development (EBRD) and Erste Group.

Proportions of the cut already legislated in June for next year and 2017 will remain in force, but the bill adds a general, also unconditional, levy cap as well which could make the reduction even more beneficial for some financial institutions. The cap could sink further in 2017 for those banks that increase lending.

However, the cap replaces earlier benefits to be withdrawn after the European Commission insisted they were market-bending, namely additional tax preferences for those banks that have already increased corporate lending between 2009 and 2014, and for those that have suffered losses on their Ukrainian and Russian operations.

This latter benefit was apparently aimed mainly at OTP. Analysts calculated that the withdrawal of the earlier benefit and the introduction of the cap looks neutral on balance for OTP while some competitors might win, as the change should leave OTP with an effective reduction to about HUF 16 bln from HUF 35 bln this year, equivalent to that already calculated after the first version of the levy cut was legislated in June.

OTP ended flat at HUF 6,030 on turnover of HUF 4.49 bln from a preliminary HUF 9.28 bln session total, broadly in line with the daily average this year.

MOL rose 1.19% to HUF 13,650 on turnover of HUF 1.12 bln.

Magyar Telekom slid 0.74% to HUF 404 on turnover of HUF 195 mln.

Richter advanced 2.64% to HUF 5,440 on turnover of HUF 3.40 bln.

The bourseʼs mid-cap BUMIX went out 0.55% lower at 1,624.05.

Elsewhere in the region, WIG 20 in Warsaw was down 0.04%, while Pragueʼs dipped 0.75%.

Western Europeʼs major indices were all up ahead of their close on Wednesday, FTSE100 in London 1.02%, DAX30 in Frankfurt 2.11%, and CAC40 in Paris 1.64%.

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