October 22, 2019 / 9:20 AM / 22 days ago

CEE MARKETS-Currencies steady as investors eye Brexit, OTP Bank gains

    By Marton Dunai
    BUDAPEST, Oct 22 (Reuters) - Emerging European assets moved
sideways in early trading on Tuesday, as investors awaited a
Hungarian central bank interest rate decision due later in the
day expected to result in no change in lending rates.
    Elsewhere there was a dearth of regional political
developments after a busy period featuring elections in Poland
and Hungary, and a government collapse in Romania, mixing with
overall market worries about Brexit and a global trade war.
    "We are all waiting for the smoke to rise on Brexit," one
dealer said in Budapest. "Mild gains in thin trading right now,
but wouldn't read much of a trend into that. We'll know more
once we see which way Brexit goes."
    Currencies gained in recent sessions as the UK and the
European Commission reached a preliminary deal at the weekend,
and appeared to hold on to those gains on Tuesday after global
sentiment turned bullish on Brexit and a Sino-U.S. trade deal.

    The National Bank of Hungary (NBH) is unanimously expected
to keep its record low rates and other monetary conditions
unchanged on Tuesday, with rates expected to remain at their
current lows at least until the end of next year.
    Hungary's inflation is near the bank's 3% medium-term target
and economic growth is subsiding from recent highs, allowing the
NBH to sit on the low rates it has championed in support of the
economic policies of the government.
    The forint, central Europe's biggest declining currency this
year, hovered near the psychological level of 330 against the
euro, after dipping below that level in the morning. 
    Hungarian stocks paced the region, adding half a percent in
an otherwise flat equity market, driven mostly by OTP Bank
, the exchange's largest stock by far, which scaled
record highs as investors remained bullish on the highly
profitable lender.
    OTP has posted record profits in recent years and just
completed an ambitious expansion in the Balkans, with more
acquisitions and organic growth projected on the medium term.
    "Fundamentally OTP is attractive, with earnings per share
projected at 1,379 forints this year and (set to) rise as far as
1,500 forints next year," Erste Bank said in a note to clients.
    Historically OTP has been priced at around 10 times earnings
per share, meaning such an earnings boom could help push the
stock to 15,000 forints on the medium term, Erste noted.
    
            CEE        SNAPSHOT   AT                         
            MARKETS              1014 CET            
                       CURRENCI                              
                       ES                            
                       Latest    Previous  Daily     Change
                       bid       close     change    in 2019
 Czech                  25.5730   25.5750    +0.01%    +0.52%
 crown                                               
 Hungary               330.1800  330.0000    -0.05%    -2.75%
 forint                                              
 Polish                  4.2755    4.2782    +0.06%    +0.33%
 zloty                                               
 Romanian                4.7599    4.7576    -0.05%    -2.22%
 leu                                                 
 Croatian                7.4395    7.4363    -0.04%    -0.40%
 kuna                                                
 Serbian               117.6600  117.6600    +0.00%    +0.54%
 dinar                                               
 Note:      calculated from                1800 CET          
 daily                                               
 change                                              
                                                             
                       Latest    Previous  Daily     Change
                                 close     change    in 2019
 Prague                 1053.44  1053.250    +0.02%    +6.78%
                                        0            
 Budapest              41433.71  41234.58    +0.48%    +5.86%
 Warsaw                 2181.00   2183.25    -0.10%    -4.20%
 Bucharest              9580.30   9580.63    -0.00%   +29.75%
 Ljubljana               871.85    873.33    -0.17%    +8.40%
 Zagreb                 2007.76   2008.19    -0.02%   +14.81%
 Belgrade   <.BELEX15    745.30    749.27    -0.53%    -2.15%
            >                                        
 Sofia                   565.08    565.19    -0.02%    -4.94%
                       BONDS                                 
                       Yield     Yield     Spread    Daily
                       (bid)     change    vs Bund   change
                                                     in
 Czech                                               spread
 Republic                                            
   2-year   <CZ2YT=RR    1.4070    0.1690   +207bps    +18bps
            >                                        
   5-year   <CZ5YT=RR    1.1370   -0.0200   +177bps     -1bps
            >                                        
   10-year  <CZ10YT=R    1.4170   -0.0070   +178bps     +1bps
            R>                                       
 Poland                                                      
   2-year   <PL2YT=RR    1.4820   -0.0300   +214bps     -2bps
            >                                        
   5-year   <PL5YT=RR    1.7700   -0.0170   +240bps     -1bps
            >                                        
   10-year  <PL10YT=R    2.0180   -0.0190   +238bps     +0bps
            R>                                       
            FORWARD    RATE      AGREEMEN                    
                                 T                   
                       3x6       6x9       9x12      3M
                                                     interban
                                                     k
 Czech Rep          <      2.27      2.24      2.18      2.18
            PRIBOR=>                                 
 Hungary            <      0.29      0.32      0.35      0.21
            BUBOR=>                                  
 Poland             <      1.72      1.71      1.68      1.71
            WIBOR=>                                  
 Note: FRA  are for ask prices                               
 quotes                                              
 
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