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CEE MARKETS-Romanian stocks, leu regain some ground after tax and pension policy shock
June 30, 2017 / 9:52 AM / 7 months ago

CEE MARKETS-Romanian stocks, leu regain some ground after tax and pension policy shock

    By Krisztina  Than and Luiza Ilie
    BUDAPEST/BUCHAREST, June 30 (Reuters) - The Romanian leu and
stocks firmed slightly on Friday, recouping some of their losses
from Thursday when the new government was voted in, as the new
prime minister denied they were planning to dismantle private
pension funds.
    Romanian markets plunged on Thursday after the ruling Social
Democrats announced an unexpected tax overhaul, which was not
discussed with business figures beforehand, and the new finance
minister said they were planning to dismantle a multi-billion
private pension scheme. 
    Hungary and Poland had taken similar steps that had upset
investors and weighed on local markets for years. The private
pension system in Romania was introduced in 2008 to supplement
ailing state pensions.
    New Romanian Prime Minister Mihai Tudose and ruling Social
Democrat Party leader Liviu Dragnea later denied such a plan to
liquidate pension funds exists.
    On Friday the leu was 0.1 percent firmer at 0849
GMT, while the Bucharest stock market index was 0.4
percent higher, after plunging almost 4 percent the day before.
    However, investors were still wary of the unpredictable
policies of the ruling Social Democrats and the fiscal impacts
of the tax changes planned for 2018.
    The Coalition for Romania's Development, which groups major
investors' associations, said the mixed messages of decision
makers over the private pension funds "has the consequence of
raising distrust over the way these measures were grounded."
    Romania's economy grew at the fastest rate in central Europe
in the first quarter, but political turmoil and policy
uncertainty have weighed on its markets in the past weeks. 
    The Czech crown was also a bit firmer on Friday,
trading just around levels it touched on Thursday when the
central bank signalled it may be heading towards its first
interest rate hike in almost a decade in the third quarter.
    The crown's path is still a big uncertainty. 
    Any significant firming trend would lessen the need for a
rate hike, although the closing of positions in the crown -
built up before the exit from the FX cap earlier this year -
could weaken the currency.
    Governor Jiri Rusnok said the crown exchange rate remained a
significant source of uncertainty, after the central bank freed
it in April from a currency cap that kept it weak.
    "Comments by Czech Central Bank governor Rusnok and the
accompanying assumption of a key rate hike already in Q3 2017
gave the koruna additional short-term support," Raiffeisen said
in a note.
    "Still, we would not expect too much short-term stimulus for
CZK on the news as additional strength could quickly be used by
investors to reduce positions acquired during the FX regime."
    The Czech central bank is getting hawkish in the region,
unlike its peers in Poland and Hungary where monetary policy is
expected to remain loose this year and next.  
    Poland's central bank is likely to keep interest rates at
record lows until the end of next year because inflation is
expected to stabilise, its governor said earlier this month.
Poland will decide on rates next week.
               CEE MARKETS  SNAPSH   AT  1048 CET         
                            Latest  Previo  Daily   Change
                            bid     close   change  in
 Czech crown                26.217  26.236   +0.07   3.01%
                                 0       5       %  
 Hungary                    309.00  309.60   +0.20  -0.06%
 forint                         00      50       %  
 Polish zloty               4.2290  4.2372   +0.19   4.14%
 Romanian leu               4.5630  4.5695   +0.14  -0.61%
 Croatian                   7.4105  7.4128   +0.03   1.95%
 kuna                                            %  
 Serbian                    120.65  120.72   +0.06   2.24%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            Latest  Previo  Daily   Change
                                    close   change  in
 Prague                     977.62  975.83   +0.18   +6.08
                                                 %       %
 Budapest                   35226.  35130.   +0.28   +10.0
                                90      27       %      7%
 Warsaw                     2313.3  2329.2  -0.69%   +18.7
                                 0       6              6%
 Bucharest                  7885.1  7855.6   +0.38   +11.2
                                 2       6       %      9%
 Ljubljana                  793.58  796.20  -0.33%   +10.5
 Zagreb                     1862.9  1873.6  -0.58%  -6.61%
                                 0       8          
 Belgrade                   713.78  714.10  -0.04%  -0.50%
 Sofia                      703.71  702.49   +0.17   +20.0
                                                 %      0%
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
   2-year                    0.123   0.123   +069b   +14bp
                                                ps       s
   5-year                   -0.039       0   +020b   +2bps
   10-year                   0.954  -0.011   +051b   +0bps
   2-year                    1.942  -0.056   +251b   -4bps
   5-year                    2.709   0.034   +295b   +5bps
   10-year                   3.355   0.002   +291b   +1bps
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
 Czech Rep             <PR    0.39     0.5    0.55       0
 Hungary               <BU    0.21    0.25    0.29    0.15
 Poland                <WI   1.752    1.79   1.825    1.73
 Note: FRA     are for ask                                
 quotes        prices                               

 (Writing by Krisztina Than, additional reporting by Jason
Hovet,; editing by Keith Weir)

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