April 9, 2018 / 8:31 AM / in 17 days

CEE MARKETS-Hungarian assets firm after Orban election victory

    * PM Orban's election victory removes policy risks -traders
    * Czech central banker says rates could rise faster

    By Sandor Peto
    BUDAPEST, April 9 (Reuters) - Hungarian stocks jumped on
Monday after Prime Minister Viktor Orban won a third term in
Sunday's election, eliminating the risk of unpredictable policy
changes, traders said.
    There had been a slight risk that supporters of the
fragmented opposition would unite in a sufficient number of
constituencies to force the government out of power, but
preliminary data showed that Orban's nationalist Fidesz party
retained its two-thirds majority.
    "The risk is out, the establishment has stabilised," one
Budapest-based fixed-income trader said.  
    The Budapest Stock Exchange's main index rose by 1.2
percent by 0716 GMT, outperforming other Central European
markets.
    The rise was led by blue-chips, including oil group MOL
 and OTP Bank, as well as holding companies
Konzum and Opus.
    The latter two, in which Orban ally Lorinc Meszaros holds
significant stakes, jumped almost 15 percent. Businessmen close
to Fidesz have acquired stakes in major industries such as
banking, energy, construction and tourism, profiting from EU
funds.
    The yield on Hungary's 10-year government bonds
dropped 6 basis points to 2.45 percent. 
    The forint firmed by 0.1 percent to 311.85 against
the euro by 0728 GMT, while the zloty was steady.
    "Life goes on. The election met market expectations," one
currency dealer said.
    Orban has been at odds with Brussels and Berlin, as a leader
of resistance in Central Europe to the European Commission's
quotas to distribute migrants in the bloc.
    But his policies, including tax cuts, have put the Hungarian
economy on a growth path and cut reliance on foreign financing.
An opposition win in the election would have caused uncertainty
over policies, analysts have said.
    Hungarian figures released on Monday showed an 838 million
euro trade surplus in February, above analysts' forecast of
722.5 million euros.
    The country's trade surplus has been a key support for the
forint even though the Hungarian central bank, led by an Orban
ally, has kept interest rates at record lows.
    Inflation has been below the bank's target despite robust
growth in wages across the region. 
    The Czech central bank, which has a lower inflation target,
started to increase interest rates in August last year.
    Its vice-governor, Mojmir Hampl, was quoted as saying on
Sunday that the bank's 0.75 percent main interest rate could
rise above 1 percent by the end of this year, sooner than its
staff forecast predicted.
    The Czech crown firmed slightly to 25.367 against
the euro.
    It shrugged off uncertainty over the future of the minority
government of Prime Minister Andrej Babis after coalition talks
between his ANO party and the Social Democrats broke off last
week. 
    
            CEE       SNAPSHOT   AT                         
            MARKETS             0928 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.3670   25.3810    +0.06%    +0.69%
 crown      >                                       
 Hungary    <EURHUF=  311.8500  312.2500    +0.13%    -0.30%
 forint     >                                       
 Polish     <EURPLN=    4.1971    4.1962    -0.02%    -0.49%
 zloty      >                                       
 Croatian   <EURHRK=    7.4250    7.4255    +0.01%    +0.07%
 kuna       >                                       
 Serbian    <EURRSD=  118.0700  118.1500    +0.07%    +0.36%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1128.56  1128.820    -0.02%    +4.67%
                                       0            
 Budapest             38580.85  37962.26    +1.63%    -2.02%
 Warsaw                2267.55   2258.80    +0.39%    -7.87%
 Ljubljana  <.SBITOP    823.66    823.66    +0.00%    +2.14%
            >                                       
 Zagreb                1801.44   1801.44    +0.00%    -2.25%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.7750   -0.0910   +136bps     -9bps
            R>                                      
   5-year   <CZ5YT=R    1.2250   -0.0050   +132bps     -1bps
            R>                                      
   10-year  <CZ10YT=    1.8580    0.0180   +136bps     +2bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.4910    0.0070   +207bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.3020    0.0110   +240bps     +1bps
            R>                                      
   10-year  <PL10YT=    3.0740   -0.0140   +258bps     -2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                0.95      1.07      1.21      0.90
            <PRIBOR=                                
            >                                       
 Hungary                  0.07      0.10      0.18      0.03
                                                    
 Poland                   1.72      1.75      1.77      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto
Editing by David Goodman)
  
 
 
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