January 28, 2020 / 11:04 AM / a month ago

CEE MARKETS-China fears hurt stocks, forint poised for profit taking

    By Marton Dunai
    BUDAPEST, Jan 28 (Reuters) - Central European stocks
weakened in midday session on Tuesday, tracking their western
counterparts, as investors remained wary of China's rapidly
spreading virus outbreak and its potential economic impact.
    The move mirrored other emerging market equities, which fell
for a fourth straight session and were set for their longest
losing streak in four months as the Chinese virus death toll
rise.
    "The news out of China worries all of us," a dealer said in
Budapest. "We are so focused on it in fact that we may be
overreacting, but it's tough to size up the potential impact
correctly."
    "So we expect cautious pessimism for now. We also have a new
milestone in the Brexit process, which does not have to have an
immediate impact, but certainly isn't a mood booster. Once some
good news comes we may brighten up, too."
    By 1010 GMT, the Czech index led regional losses with
a 1.4% fall, followed by Budapest's with a 0.8% decrease.
    Bucharest, the region's best performers so far this
year, was also sliding, with only Warsaw bucking the trend.
    Regional currencies moved sideways, with the Hungarian
forint unchanged at 337.4 per euro after setting a
record low of 338.77 on Monday.
    The forint eased on Monday despite an announcement from the
central bank that it had accepted less than its original offer
at a regular forint swap tender, lowering liquidity injections.

    Analysts say the forint could continue trading between 335
and 338, and that the next big impact could come from the
central bank's rate-setting meeting on Tuesday.
    The bank, considered "incredibly dovish" by some investors,
is expected to hold fire again as inflation could retreat from a
multi-year high and economic growth could lose steam in coming
years, a Reuters poll showed.
    "I think barring some surprise central bank communication,
we are positioned for profit taking," another Budapest dealer
said. "That's our baseline scenario."
    In Romania, the leu was little moved by a finance minister
statement that Romania recorded a higher than expected budget
deficit of 4.6% of GDP in 2019. The targeted 4.4% was already
far above the European Union's 3% ceiling.
        
            CEE        SNAPSHOT   AT                         
            MARKETS              1110 CET            
                       CURRENCI                              
                       ES                            
                       Latest    Previous  Daily     Change
                       bid       close     change    in 2020
 Czech                  25.2600   25.2690    +0.04%    +0.68%
 crown                                               
 Hungary               337.3600  337.3800    +0.01%    -1.84%
 forint                                              
 Polish                  4.2799    4.2781    -0.04%    -0.55%
 zloty                                               
 Romanian                4.7788    4.7807    +0.04%    +0.20%
 leu                                                 
 Croatian                n/a       7.4403    n/a       n/a
 kuna                                                
 Serbian                 n/a     117.4800    n/a       n/a
 dinar                                               
 Note:      calculated from                1800 CET          
 daily                                               
 change                                              
                                                             
                       Latest    Previous  Daily     Change
                                 close     change    in 2020
 Prague                 1115.50  1131.580    -1.42%    -0.01%
                                        0            
 Budapest              43573.19  43929.17    -0.81%    -5.45%
 Warsaw                 2087.18   2083.79    +0.16%    -2.93%
 Bucharest             10089.43  10105.37    -0.16%    +1.12%
 Ljubljana               959.66    963.58    -0.41%    +3.65%
 Zagreb                 2026.19   2030.38    -0.21%    +0.43%
 Belgrade   <.BELEX15    796.04    797.82    -0.22%    -0.70%
            >                                        
 Sofia                   578.51    579.49    -0.17%    +1.83%
                                                             
                       Yield     Yield     Spread    Daily
                       (bid)     change    vs Bund   change
                                                     in
 Czech                                               spread
 Republic                                            
   2-year   <CZ2YT=RR    1.7660    0.0380   +240bps     +4bps
            >                                        
   5-year   <CZ5YT=RR    1.6150    0.0000   +224bps     +1bps
            >                                        
   10-year  <CZ10YT=R    1.5390   -0.0540   +194bps     -4bps
            R>                                       
 Poland                                                      
   2-year   <PL2YT=RR    1.5230    0.0140   +216bps     +2bps
            >                                        
   5-year   <PL5YT=RR    1.8670   -0.0110   +250bps     -1bps
            >                                        
   10-year  <PL10YT=R    2.2050   -0.0110   +260bps     +0bps
            R>                                       
            FORWARD                                          
                       3x6       6x9       9x12      3M
                                                     interban
                                                     k
 Czech Rep          <  Real-Tim  Real-Tim  Real-Tim  Real-Tim
            PRIBOR=>   e Engine  e Engine  e Engine  e Engine
                       Initiali  Initiali  Initiali  Initiali
                       zation    zation    zation    zation
                       Error     Error     Error     Error
 Hungary            <  Real-Tim  Real-Tim  Real-Tim  Real-Tim
            BUBOR=>    e Engine  e Engine  e Engine  e Engine
                       Initiali  Initiali  Initiali  Initiali
                       zation    zation    zation    zation
                       Error     Error     Error     Error
 Poland             <  Real-Tim  Real-Tim  Real-Tim  Real-Tim
            WIBOR=>    e Engine  e Engine  e Engine  e Engine
                       Initiali  Initiali  Initiali  Initiali
                       zation    zation    zation    zation
                       Error     Error     Error     Error
 Note: FRA  are for ask prices                               
 quotes                                              
 **************************************************          
 ************                                        
 
 (Reporting by Marton Dunai, additional reporting by Radu
Marinas in Bucharest; 
Editing by Arun Koyyur)
  
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