June 29, 2017 / 8:00 AM / 25 days ago

CEE MARKETS-Romanian stocks under-perform as government shows tax plans

7 Min Read

    By Luiza Ilie and Jason Hovet
    BUCHAREST/PRAGUE, June 29 (Reuters) - Romanian stocks
under-performed emerging European peers in early Thursday
trading as the new government tabled an ambitious new tax plan
including corporate tax changes before heading for a Parliament
confidence vote it was widely expected to pass.
    The ruling Social Democrats plan to replace a flat 16
percent corporate tax on profit with a multi-levelled tax on
turnover and introduce "a solidarity contribution" next year, a
revised governing programme showed.
    Designated Prime Minister Mihai Tudose was picked as prime
minister after ruling parties sacked premier Sorin Grindeanu on
June 21 for failing to implement an ambitious programme that
helped them win a December election. 
    A majority of ministers from the ousted cabinet feature in
the new government lineup. It is likely to receive approval
given the comfortable parliamentary majority held by the ruling
Social Democrat Party (PSD) and its junior partner ALDE.
    The confidence vote is expected later on Thursday. The
overall impact from the new governing programme remains to be
seen but initial market reactions show negative expectations for
equities.
    The leu was flat after a session of above-market gains on
Wednesday, and other currencies were also broadly unchanged.
Politics is expected to impact the Romanian unit in the longer
term, an analyst said.
    "Even if this brings an end to the government crisis for
now, politics remain a factor of uncertainty in Romania,"
Commerzbank said in a note.
    "The case of the previous government illustrated just how
quickly Dragnea can withdraw his support."
    "Focus is now likely to increasingly rest on the positive
fundamental environment, and we see appreciation potential for
RON," it added.
    The Czech central bank is widely expected to maintain its
key interest rate unchanged near zero on Thursday but its first
rate hike in about a decade is getting closer and could come
before the year's end rather than next year as previously
expected, a Reuters poll showed on Monday.
     While the bank's own outlook indicates a hike may come in
the third quarter, several board members, including Governor
Jiri Rusnok, have said the tightening might come after that if
the crown currency appreciates significantly. 
    Still, markets are not yet pricing in a hike this year.
    "So the CNB is much more hawkish than the market," a rates
dealer said.
           
               CEE MARKETS  SNAPSH   AT  0911 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                26.290  26.302   +0.05   2.73%
                                 0       5       %  
 Hungary                    309.75  309.74   +0.00  -0.30%
 forint                         00      00       %  
 Polish zloty               4.2355  4.2325  -0.07%   3.98%
 Romanian leu               4.5501  4.5502   +0.00  -0.33%
                                                 %  
 Croatian                   7.4110  7.4115   +0.01   1.94%
 kuna                                            %  
 Serbian                    120.87  120.96   +0.07   2.05%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     980.63  977.22   +0.35   +6.40
                                                 %       %
 Budapest                   35502.  35455.   +0.13   +10.9
                                64      97       %      4%
 Warsaw                     2349.5  2327.6   +0.94   +20.6
                                 9       8       %      2%
 Bucharest                  8153.9  8168.3  -0.18%   +15.0
                                 5       7              9%
 Ljubljana                    0.00  794.79   +0.00  -100.0
                                                 %      0%
 Zagreb                       0.00  1877.7   +0.00  -100.0
                                         1       %      0%
 Belgrade                     0.00  709.83   +0.00  -100.0
                                                 %      0%
 Sofia                      703.08  702.21   +0.12   +19.8
                                                 %      9%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.049       0   +062b   -4bps
                                                ps  
   5-year                    0.054   0.106   +032b   +7bps
                                                ps  
   10-year                    0.92       0   +051b   -6bps
                                                ps  
 Poland                                                   
   2-year                    1.929   0.009   +250b   -3bps
                                                ps  
   5-year                    2.716   0.085   +298b   +5bps
                                                ps  
   10-year                   3.359   0.073   +294b   +1bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.34    0.42    0.51       0
               IBOR=>                               
 Hungary               <BU    0.19     0.2     0.2    0.15
               BOR=>                                
 Poland                <WI   1.749    1.79    1.82    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 

 (Reporting by Reuters bureaus, writing by Marton Dunai, editing
by Ed Osmond)
  
 
 

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