December 19, 2018 / 2:24 PM / 3 months ago

UPDATE 1-Romanian shares equal worst day on record after bank tax surprise

    * Romanian stocks fall over 12 percent on government plans
    * Tax plans slam banks, energy companies
    * Erste, Raiffeisen shares tumble in Vienna, Prague
    * 

 (Combines stories, adds comments, updates market moves)
    By Luiza Ilie and Sandor Peto
    BUCHAREST/BUDAPEST, Dec 19 (Reuters) - Romania's stock
market plunged 12 percent towards its worst day on record on
Wednesday after the country's government announced shock plans
to tax banking assets and cap gas prices.
    The move instantly wiped out what had been one of Europe's
best market performances of the year and caused trouble as far
afield as Austria where banks such as Erste and
Raiffeisen that operate in Romania fell heavily.
    The trigger was an announcement late on Tuesday by Romania's
finance minister for a "tax on greed" that will cap money market
lending rates to 1.5 percent.
    There was also a plan to limit gas prices, enforce a
turnover tax for energy and telecoms firms and enable Romanians
to pull out of mandatory private pension funds after
contributing for five years.
    Bucharest's bluechip BETI bourse fell 12.2 percent,
with lenders Banca Transylvania and French Societe
Generale unit BRD Group ROBRD.BX shedding 18 percent and 10.3
percent, respectively.
    Romania's centrist President Klaus Iohannis and investors
slammed the measures, saying they would hit consumers and banks
and urged the government to scrap the plans.
    "This avalanche of fiscal measures ... is unacceptable and
the symptom of a fracture between the government and economic
agents," said the Coalition for Romania’s Development, which
groups the country's largest investors’ associations.
    The American Chamber of Commerce called them "irresponsible
and reckless," and said they were "throwing the market into
complete chaos".
    The 12.2 percent slump saw the BETI match it worst day on
record which was back in January 2009 and made an already bad
year look worse for Central European markets, where only
Bucharest had notched up any visible gains before its plummet.
    So far this year Prague's benchmark has shed 7 percent
while Warsaw's WIG20 has slid almost 6 percent as funds
flowed into the rallying dollar from emerging market assets.
    Bucharest's government went back and forth on its tax
intentions last year, provoking more uncertainty among investors
and the leu currency having already enforced
consumption-friendly wage and pension hikes at the expense of
infrastructure investment.
    Morgan Stanley said the banking tax implied a reduction of
overall profits of more than 50 percent.
    While other Central and Eastern European states have
enforced new banking taxes in recent years, none had been tied
to interbank rates.
    "Linking a bank tax on ROBOR developments is also
unprecedented and it could impair the central bank's control
over its monetary policy," BCR said.
    In Austria, Erste Bank, which gets 8.4 percent of its
revenues from Romania's biggest bank Banca Comerciala Romana,
saw its shares tumble as much as 10 percent, and remained the
day's worst STOXX 600 faller despite recouping some losses.
    Raiffeisen Bank, which has around 6 percent of its assets in
Romania according to figures published last month, was last
trading down 3.8 percent.
    Romania's measures deepened Prague's losses as well.
    The Prague bourse's main index fell 2.2 percent to its
lowest level since July 2017 on Wednesday, driven by an 8
percent fall Erste's Czech-listed shares..
    Budapest's BUX also dipped though Warsaw
bucked the regional trend with a slight gain.
    In the currency markets, Romania's leu shed 0.4
percent against the euro to trade at 4.6525, the zloty
firmed 0.1 percent and the forint was steady as focus
also turned to the U.S. Federal Reserve's final meeting of the
year.
    Signals that U.S. rate rises will slow next year could make
emerging market assets look relatively more attractive. The
recent steep drop in oil prices has helped corset inflation in
Central Europe, reducing pressure on central banks to raise
their interest rates.
    
            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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