January 2, 2017 / 9:57 AM / a year ago

CEE MARKETS-Currencies range-bound, investors assess strong Polish, Czech PMI

By Krisztina  Than
    BUDAPEST, Jan 2 (Reuters) - Central European currencies
opened the new year a touch weaker in thin trading, unfazed by
strong December purchasing manager indices published on Monday.
    The December manufacturing readings could be a harbinger of
a pickup in growth in the European Union's eastern wing in 2017,
supported by fiscal loosening and an acceleration of investments
in the region.
    "Investments have been a drag in CEE in 2016, mainly due to
the major slowdown in EU fund inflows. This should reverse next
year," Erste Bank said in a note.
    Economic growth in Central Europe outpaced the euro zone
last year, and this year could bring about an acceleration in
GDP growth, analysts said.
    Data published on Monday showed Poland's manufacturing index
rising to a 17-month high of 54.3 in December, while the Czech
PMI index climbed to a 9-month high.  
    Hungary's PMI dropped in December from November due to
end-year production shutdowns, but still remained strong.
    Hungary launched fiscal stimulus late last year, cutting the
corporate tax rate and social taxes, and raising wages. This
could push economic growth to above 4 percent this year, the
government said.  
    Prime Minister Viktor Orban's cabinet sees economic growth
rising to 4.1 percent this year and 4.3 percent in 2018, when
elections are due. In 2016 growth is expected below 3 percent.
    "Although Hungary seems to also be aggressively easing its
fiscal stance lately, we see Poland and Romania at the limit as
far as the 3 percent of GDP nominal Maastricht (budget deficit)
threshold is concerned," Erste Bank said.
    In Romania the Social Democrats' election victory has
heightened uncertainty over the country's ability to keep its
budget deficit below the EU's ceiling, as their governing
programme includes ambitious spending plans.
    Inflation is also expected to pick up in Central Europe, on
the back of higher oil prices, faster consumption and rising
    "Tight labour markets, structural funds flowing freely under
the new semester and the implications of these for CPI inflation
and rates will be the focus in CEE," Nomura analyst Peter Attard
Montalto said in a note. 
    "We expect Hungary to have the most upside risk on
inflation, followed by Romania...," he added.
    As for stock markets, Budapest shares, which rose by
a third in 2016 boosted by Hungary's upgrades to investment
grade, were about half a percent lower on Monday. The Prague
Stock Exchange's main index was down 0.2 percent. 
    The region's most liquid market in Poland added 5
percent last year, and was flat on Monday.    
 **************** CEE MARKETS SNAPSHOT AT 0934 CET ************ 
 ************************* CURRENCIES *************************
                            Latest  Previous   Daily   Change  
                            bid     close      change  in 2017 
 Czech crown                 27.020    27.019   +0.00%  -0.05% 
 Hungary forint             309.500   309.045   -0.15%  -0.22% 
 Polish zloty                 4.413     4.408   -0.10%  -0.19% 
 Croatian kuna                7.551     7.556   +0.07%  +0.05% 
 Serbian dinar              123.330   123.300   -0.02%  +0.02% 
 Note: daily change calculated from previous close at 1800 CET 
 **************************** STOCKS **************************
                            Latest   Previous  Daily   Change  
                                     close     change  in 2017 
 Prague                       919.01   921.61   -0.28%  -0.28% 
 Budapest                   31829.72 32003.05   -0.54%  -0.54% 
 Warsaw                      1940.91  1947.92   -0.36%  -0.36% 
 Ljubljana                      0.00   717.59   +0.00% -100.0% 
 Zagreb                      1996.10  1994.84   +0.06%  +0.06% 
 Belgrade                     717.37   714.72   +0.37%  +0.00% 
 Sofia                        586.43   586.51   -0.01%  +0.00% 
 ***************************** BONDS **************************
                        Yield    Yield    Spread     Daily     
                        (bid)    change   vs Bund    change in 
 Czech Republic                                      spread    
   2-year                -0.99    -0.094   -022bps   -11bps    
   5-year                -0.18    +0.039   +037bps    +5bps    
  10-year                0.480    +0.013   +029bps    +3bps    
   2-year                3.260    +0.060   +307bps    +7bps  
   5-year                0.000    +0.000   +000bps    +0bps  
  10-year                0.000    +0.000   +000bps    +0bps  
 ******************* FORWARD RATE AGREEMENTS ******************
                            3x6     6x9    9x12 3M interbank
 Czech Rep                    0.000   0.000  0.000   0.00 
 Hungary                      0.000   0.000  0.000   0.00 
 Poland                       Ask     Ask    Ask     Ask 
 Note: FRA quotes are for ask prices 

 (Reporting by Krisztina Than; Editing by Peter Graff)
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below