December 19, 2018 / 10:49 AM / 6 months ago

CEE MARKETS-Romania tax plans wipe out robust 2018 stocks gain at a dash

    * Romanian stocks fall almost 8 percent on government plans
    * Romanian tax plans hurt banks, energy companies
    * Romanian plans hit Erste, Raiffeisen shares in Vienna,
Prague
    * Crown sets multi-month high, "dovish" Fed rate hike is
seen

    By Sandor Peto
    BUDAPEST, Dec 19 (Reuters) - Bucharest stocks plunged on
Wednesday, with the Romanian government's tax and pension
changes wiping out almost all of an 8 percent gain of the
bluechip index since 2017.
    The plans sent jitters through Central Europe, knocking
shares in Erste and Raiffeisen, regional banks whose earnings
may be curbed by the Romanian measures.
    The government plans taxing banking assets, capping gas
prices, enforcing a new turnover tax for energy firms and
enabling Romanians to withdraw out of mandatory private pension
funds after contributing for five years.

    Bucharest's bluechip stock index fell 7.7 percent by
0825 GMT, with lenders Banca Transylvania and French
Societe Generale unit BRD Group shedding 13 percent
and 10.3 percent, respectively.
    The fall makes a bad year look worse for Central European
stock markets, where only Bucharest's share index had notched up
visible gains.
    So far this year Prague's benchmark shed 7 percent and
Warsaw's almost 6 percent as funds flowed into the
rallying dollar from risky emerging market assets.
    Romania's measures deepened Prague's losses as well.
    The Prague bourse's main index fell 2.4 percent to its
lowest level since July 2017 on Wednesday, driven by an 8
percent fall in the shares of Erste, an Austrian bank
active across the region, including Romania.
    Erste shares fell 8 percent in Vienna, while
Raiffeisen stock shed 4.8 percent.
    In contrast with Bucharest and Prague, Budapest's and
Warsaw's share indices were slightly positive.
    While Romania's leu shed 0.2 percent against the
euro to trade at 4.6559, the zloty firmed 0.1 percent
and the forint was steady.
    The mood was cautiously optimistic ahead of the Federal
Reserve's meeting, amid speculation that a plunge in crude
prices may make the Fed end its rate hikes.
    Lower U.S. rates would make emerging market assets look
relatively more attractive, while the past months' decline in
crude prices has helped inflation retreat in Central Europe,
reducing pressure on central banks to tighten policy.
    The crown briefly touched a 2-and-1/2-month high
against the euro in early trade despite expectations that the
Czech central bank could take a pause at its meeting on Thursday
after four straight interest rate hikes. 
    It is seen increasing rates further next year.
    The Hungarian central bank shifted to a more hawkish tone in
its comments on Tuesday. 
    Polish figures released on Wednesday showing a slowdown in
annual industrial output growth to 4.7 percent in November are
unlikely to nudge the central bank towards tighter policy,
indicating an economic slowdown, analysts said.  
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1025 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7350   25.7300    -0.02%    -0.75%
 crown      >                                       
 Hungary    <EURHUF=  322.4000  322.3500    -0.02%    -3.56%
 forint     >                                       
 Polish     <EURPLN=    4.2810    4.2864    +0.13%    -2.44%
 zloty      >                                       
 Romanian   <EURRON=    4.6559    4.6465    -0.20%    +0.51%
 leu        >                                       
 Croatian   <EURHRK=    7.4180    7.4145    -0.05%    +0.17%
 kuna       >                                       
 Serbian    <EURRSD=  118.3000  118.3300    +0.03%    +0.17%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1002.30  1026.640    -2.37%    -7.04%
                                       0            
 Budapest             39425.25  39475.61    -0.13%    +0.12%
 Warsaw                2316.20   2315.18    +0.04%    -5.89%
 Bucharest             7768.16   8419.19    -7.73%    +0.19%
 Ljubljana  <.SBITOP    791.41    796.23    -0.61%    -1.86%
            >                                       
 Zagreb                1744.19   1747.42    -0.18%    -5.35%
 Belgrade   <.BELEX1    759.97    753.68    +0.83%    +0.02%
            5>                                      
 Sofia                  589.96    592.12    -0.36%   -12.91%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6250    0.0140   +222bps     +1bps
            R>                                      
   5-year   <CZ5YT=R    1.8110    0.0120   +207bps     +0bps
            R>                                      
   10-year  <CZ10YT=    1.9790    0.0000   +173bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.4080    0.0000   +200bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.3210    0.0000   +258bps     -1bps
            R>                                      
   10-year  <PL10YT=    2.9120    0.0110   +266bps     +0bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.18      2.27      2.34      2.02
            <PRIBOR=                                
            >                                       
 Hungary                  0.33      0.57      0.84      0.13
                                                    
 Poland                   1.75      1.77      1.79      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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