BUX further up on Erste deal

Telco

The Budapest Stock Exchange's main BUX index finished up 1.88% at 17,665.69, a two-month high, Monday after rising 0.74% Friday. It is up 6.20% from year-end, after losing 10.40% last year. Over last week, the BUX rose 4.89% after falling 1.36% in the previous week.

Skyrocketing in the afternoon and paring gains only lightly by close, the Budapest parquet again hugely outperformed, weathering a global downturn as "Grexit" fears, a flare-up of violence in Ukraine accompanied by new EU sanctions against Russia, and dismal Chinese trade data spooked investors in developed markets.

A memorandum of understanding signed Monday afternoon in Budapest which involves the Hungarian government and the EBRD taking 15% stakes each in Erste Bank's Hungarian unit, together with the prime minister's pledge to gradually reduce the special banking tax next year and in 2017, was welcomed by market players as a sign of reconciliation between the government and the local banking sector which, although increases the state's presence in the sector, also deflects the risk of Western banks leaving the country.

Other local news also helped, including December trade surplus which exceeded expectations in euro terms, while whole-year exports growth outpaced that of imports. Cheaper oil and rebounding external demand point to further strength in Hungarian trade performance in the coming months, supporting robust overall economic growth,  BLNP Paribas said in a note on Monday, confounding a European Commission forecast last week which predicted GDP growth decelerating this year and next more than seen earlier.

Basic optimism is also fueled by expectations for ECB's rain of funds starting in March, soon to be followed by a probable easing from the National Bank of Hungary (MNB).

Falling for most of the day, even Richter could rise by close, after it published Q4 losses beyond the worst of market forecasts, and it projected expenditure cuts worth HUF 10 bln and sales to drop 7-8% in euro terms this year.

However, an OECD paper out Monday, full of reform recommendations which could accelerate growth in Hungary according to the organisation, but would signal a U-turn in some of the government's economic policies if carried out, pointed to risks little diminishing yet in overall government-private business relationships.

Risks ahead also include an unveiled declaration of war at the week-end by one of Hungary’s wealthiest oligarchs and former treasurer of the ruling block on the prime minister, his long-time ally. So far rooted in the government's media policies, the feud might sow the seeds of a palace revolution within the ruling Fidesz party, political analysts say.

OTP shot up 4.85% to HUF 4,110, a near three-month high, on turnover of HUF 13.98 bln from a HUF 15.80 bln session total, more than double the daily average this year.

MOL ended flat at 11,730 on turnover of HUF 469 mln.

Magyar Telekom rose 1.10% to HUF 368 on turnover of HUF 238 mln.

Richter advanced 0.92% to HUF 3,860 on turnover of HUF 887 mln.

The bourse's mid-cap BUMIX went out 0.71% higher at 1,478.00

Elsewhere in the region, the WIG 20 in Warsaw was down 0.38%, while Prague's PX rose 0.16%. Western Europe's major indices were all down ahead of their close Monday, FTSE-100 in London 0.36%, DAX30 in Frankfurt 1.81%, and CAC40 in Paris 1.11%.

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