BUX up on Greece but worries loom

Telco

The Budapest Stock Exchange's main BUX index finished up 1.08% at 18,205.38, a five-month high, Monday after a 0.38% dip on Friday. It is up 9.45% from year-end, after losing 10.40% last year. Over last week, the BUX dropped 0.40% after soaring 4.29% in the previous week.

The Budapest parquet welcomed with relief the conditional week-end agreement to extend Greece's debt package in force since 2012 to another four months from its official expiry at the end of February. However, local concerns slowed gains and capped volumes.

The Russian rouble dropped steeply after Moody's became the second agency to cut Russia's credit rating to junk. This may hit Hungarian blue chips with high exposure to the Russian market later although a pledge made last week in Budapest by Russian president Vladimir Putin to smooth the activities of these companies in his country is market-supportive for the time being. Richter also gained on the US market outlook of one its prospective medicines after a Friday presentation of its partner, Actavis.

Meanwhile, another point of confrontation between Hungary's government and the EU is also emerging as the European Commission is looking into the legality of Hungary's contract with Russia to construct new units in Hungary's sole, Russian-built, nuclear power plant at Paks (C Hungary). A Financial Times report on the fact of the scrutiny was confirmed on Monday by a spokesperson of the Brussels commission, although she added that the analysis of the situation was at a "very preliminary" stage. The Financial Times claimed Hungary may be facing a "veto or prohibitive fine" from the European Union.

Deflation hits Hungary, too, while expectations wary how and when the National Bank of Hungary (MNB) might renew easing, or will it at all. This was reflected in GKI-Erste's combined gauge of consumer and business confidence index published on Monday, falling to minus 3.2 points in February from 2.9 points in January as consumer reluctance to buy eased a bit to minus 22.4 points in February from minus 23.8 in January, but business expectations edged down to 3.5 points from 4.4 points.

Deflation risks loom in Hungary although strong boosters to GDP will hide it in the first half of this year, Commerzbank said in a note on Monday. GDP "has got off to a good start on 2015," it said, citing large year-end bonuses in December, low energy and utility prices and interest rates as well as the government's drive to increase its public-work program. The risk, however, is that deflation will hit government revenues, curbing government spending and public jobs eventually, Commerzbank argued.

OTP won 1.05% to HUF 4,330 on turnover of HUF 3.33 bln from a HUF 5.09 bln session total, less than two-thirds of the daily average this year.

MOL gained 0.51% to HUF 11,785 on turnover of HUF 702 mln.

Magyar Telekom rose 0.27% to HUF 375 on turnover of HUF 63 mln.

Richter advanced 2.18% to HUF 3,985 on turnover of HUF 847 mln.

The bourse's mid-cap BUMIX went out 0.38% higher at 1,523.89.

Elsewhere in the region, the WIG 20 in Warsaw was up 0.71%, while Prague's PX grew 0.38%. Western Europe's major indices were mixed ahead of their close Monday, FTSE-100 in London down 0.28%, DAX30 in Frankfurt up 0.49%, and CAC40 in Paris up 0.45%.


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