April 29, 2019 / 9:20 AM / 24 days ago

CEE MARKETS-Banks drag down stocks as Prague mulls new taxes

    * Fall in banks stocks knocks Prague bourse to 2-month-low
    * Stocks regains some ground as PM Babis says he opposes new
taxes
    * Crown strengthens versus forint, CNB may increase rates
further

 (Adds rebound of Czech stocks on new comments from PM Babis)
    By Sandor Peto
    BUDAPEST, April 29 (Reuters) - Czech stocks regained some
ground late on Monday after Prime Minister Andrej Babis
clarified he did not support a possible measure to introduce a
new tax on banks and telecoms. 
    Earlier in the session, a fall in Czech banks sent Prague's
main stock index to a 2-month-low following news that the
government is considering the introduction of a tax on the
sector.
    The Czech state budget is expected to post its first deficit
next year since 2015, and the government is looking for new
revenue sources as economic growth slows in Europe and at home.
    The main driver of a 1.7 percent fall in the Prague index by
1314 GMT was a 2.3 percent decline in the shares of heavyweight
Erste.
    Moneta Money Bank shed 8.6 percent as it started
trading ex-dividend, contributing to its underperformance.
Komercni Banka fell 2.9 percent.
    Czech premier Babis said in a report broadcast on Czech
television late on Sunday that the government would debate
sector taxes on banks, insurers and mobile operators.
    The Prague bourse's index rebounded in afternoon trade 
after the daily newspaper Lidove Noviny's website quoted Babis
as saying he remained opposed to introducing sector taxes on
banks and telecoms companies.  
    The junior coalition partner, the Social Democrats, had
pushed for a sector tax on banks.     
    The Czech crown traded firmer by 0.1 percent
against the euro at a one-week high of 25.68.
    Against its Central European peer, Hungary's forint
 touched its strongest level since April 12, bid at
12.5635.
    The crown is drawing support from expectations that the
Czech central bank will continue at a meeting due on Thursday to
increase interest rates.
    The National Bank of Hungary (NBH) is expected to keep
interest rates on hold at its own meeting on Tuesday.

    The forint would draw support from any signal from the NBH
that it plans to further tighten liquidity in forint interbank
markets, but otherwise the currency could weaken this week,
Erste analysts said in a note.
    "The koruna (crown) could perhaps get some support from an
increasingly likely rate hike on Thursday," they said, adding
though, that a hike in May or June is unlikely to be followed by
another step this year.
    Elsewhere, the kuna was steady at 7.416, after
Moody's changed the outlook of both Croatia's and Slovenia's
sovereign debt rating late on Friday to "positive" from
"stable".
    Some market participants, including Raiffeisen analysts, had
expected an upgrade in both countries' ratings.
    Stock markets in Romania, Bulgaria and Serbia were closed on
Monday due to public holidays marking Orthodox Christian Easter,
though their currencies traded.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1514 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6800   25.6970    +0.07%    +0.11%
 crown      >                                       
 Hungary    <EURHUF=  322.7000  322.2500    -0.14%    -0.50%
 forint     >                                       
 Polish     <EURPLN=    4.2929    4.2918    -0.03%    -0.08%
 zloty      >                                       
 Romanian   <EURRON=    4.7510    4.7596    +0.18%    -2.04%
 leu        >                                       
 Croatian   <EURHRK=    7.4160    7.4155    -0.01%    -0.08%
 kuna       >                                       
 Serbian    <EURRSD=  117.8600  117.9550    +0.08%    +0.37%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1072.66  1091.470    -1.72%    +8.73%
                                       0            
 Budapest             42660.59  43064.40    -0.94%    +9.00%
 Warsaw                2359.28   2372.25    -0.55%    +3.63%
 Ljubljana  <.SBITOP    884.69    884.48    +0.02%   +10.00%
            >                                       
 Zagreb                1828.43   1819.86    +0.47%    +4.55%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.7350    0.0070   +233bps     -1bps
            R>                                      
   5-year   <CZ5YT=R    1.7600    0.0500   +217bps     +3bps
            R>                                      
   10-year  <CZ10YT=    1.8590    0.0070   +185bps     -2bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6240    0.0090   +222bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.2580    0.0130   +267bps     -1bps
            R>                                      
   10-year  <PL10YT=    2.9290    0.0170   +292bps     -1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.25      2.27      2.27      2.03
            <PRIBOR=                                
            >                                       
 Hungary                  0.32      0.45      0.61      0.16
                                                    
 Poland                   1.74      1.77      1.79      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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