January 24, 2018 / 11:15 AM / a year ago

CEE MARKETS-Stocks retreat, Czech crown gives up some ground

    * Budapest, Warsaw stock indexes retreat from record highs
    * Polish stocks, top performers in 2017, seen rising further
    * Crown retreats, but near 5-year highs, CNB rate hike seen

    By Sandor Peto
    BUDAPEST, Jan 24 (Reuters) - Central European stocks
retreated on Wednesday, taking a pause like their Asian and
Western European counterparts, after Budapest and Warsaw indexes
hit record highs. 
    After strong gains last year, the Czech, Hungarian and
Polish indexes have risen 5-6 percent so far in 2018, driven by
a global rally in shares and sound economic fundamentals in the
region and its main trade partner, the euro zone.
    As a global rally lost steam, the region's biggest
independent bank, OTP, led a retreat in Central
European markets.
    Instead of pushing to the key technical level of 12,000
forints ($47.97) as some analysts had expected, the stock had
shed 1.7 percent by 1017 GMT to trade at 11,530 forints.
    That contributed to Budapest's main index, which in
early trade hit a new record high, losing 0.6 percent.
    Warsaw's all-share index eased 0.2 percent, off
Wednesday's record high.
    Prague's bluechip index, which in early trade hit its
highest since August 2011, shed 0.1 percent.
    The Czech crown was marginally weaker against the
euro. On Tuesday it approached 5-year highs.
    It received some support from comments from Czech central
bank (CNB) board member Marek Mora who said positive data from
the Czech and European economies warranted a 25 basis point
interest rate hike at the bank's meeting next week.
    The comments came as no surprise, though, a markets had more
or less priced in a rate increase, after two hikes since August
as the bank defends its inflation target.
    Expectations for further hikes buoy the Czech crown.
    January business and consumer confidence figures released on
Wednesday were mixed.
    A CNB lending survey published early this week was negative
for the crown, showing banks further tightened credit standards
for housing loans, under pressure from CNB regulations,
Raiffeisen analyst Frantisek Taborsky said in a note.
    "Given the set of macroprudential measures in place, the CNB
does not have to necessarily tackle these (lending overheating)
risks via conventional rate hikes," he said.
    Czech Prime Minister Andrej Babis is expected to deliver his
government's resignation to President Milos Zeman on Wednesday,
after the minority government lost a parliament confidence vote
last week.
    Investors usually shrug off political developments in the
    They have also mostly ignored Warsaw's tension with the
European Commission over Poland's judicial reforms which
Brussels said threatened the rule of law.
    Warsaw stocks were the top performer last year among all
emerging markets in MSCI's country indices, and analysts and
fund managers expect another strong performance this year.

            CEE       SNAPSHOT   AT                         
            MARKETS             1117 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.3850   25.3690    -0.06%    +0.62%
 crown      >                                       
 Hungary    <EURHUF=  309.0900  309.8500    +0.25%    +0.59%
 forint     >                                       
 Polish     <EURPLN=    4.1628    4.1683    +0.13%    +0.33%
 zloty      >                                       
 Romanian   <EURRON=    4.6675    4.6660    -0.03%    +0.26%
 leu        >                                       
 Croatian   <EURHRK=    7.4305    7.4305    +0.00%    -0.00%
 kuna       >                                       
 Serbian    <EURRSD=  118.5500  118.6800    +0.11%    -0.04%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1135.81  1137.060    -0.11%    +5.35%
 Budapest             41269.30  41516.41    -0.60%    +4.80%
 Warsaw                2624.31   2630.37    -0.23%    +6.63%
 Bucharest             8436.41   8436.41    +0.00%    +8.80%
 Ljubljana  <.SBITOP    831.84    835.90    -0.49%    +3.16%
 Zagreb                1868.61   1867.09    +0.08%    +1.40%
 Belgrade   <.BELEX1    772.26    775.16    -0.37%    +1.64%
 Sofia                  708.32    709.28    -0.14%    +4.56%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    0.4580   -0.1260   +105bps    -13bps
   5-year   <CZ5YT=R    1.0190    0.0320   +114bps     +1bps
   10-year  <CZ10YT=    1.7840   -0.0130   +120bps     -3bps
   2-year   <PL2YT=R    1.5740    0.0230   +216bps     +2bps
   5-year   <PL5YT=R    2.6730    0.0310   +279bps     +1bps
   10-year  <PL10YT=    3.3480    0.0290   +277bps     +1bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                1.01      1.17      1.32      0.77
 Hungary                  0.10      0.15      0.23      0.02
 Poland                   1.75      1.76      1.86      1.72
 Note: FRA  are for ask prices                              
 ($1 = 250.1700 forints)

 (Additional reporting by Marcin Goettig in Warsaw; Editing by
Mark Potter)
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