Weak Q1 weighs on Richter stock, Czech, Romanian rates seen on hold

BUDAPEST: Shares of Hungarian drug maker Richter fell early on Thursday and underperformed the wider Budapest bourse after it reported a 19 percent fall in first-quarter net profit.

Central European currencies were flat or a touch firmer before interest rate decisions in the Czech Republic and Romania, where central banks are expected to keep rates on hold.

The Czech central bank (CNB) is also widely expected to keep the outlook for its weak crown policy unchanged when it meets on Thursday but analysts increasingly find it likely the bank will later extend the intervention regime by several months into the second half of 2017.

Analysts also see it as unlikely that the bank will employ negative rates as upside pressure on the crown cap has eased in recent months.

"We see a risk the CNB will postpone officially its exit from the FX floor into mid-2017 from 'H1-2017, closer to mid- 2017' as indicated by (board member and prospective governor Jiri) Rusnok," Citi wrote in a client note.

Central European central banks have been in a dovish mode, with some - like the Hungarian central bank - cutting interest rates further to boost economic growth and revive inflation.

However, Czech rates are already at a technical zero, at 0.05 percent, and the crown has been trading close to the central bank's cap at 27 to the euro.

"The CNB's monetary-policy meeting on Thursday may strengthen projections that its FX intervention will not be discontinued until mid-2017," Unicredit said in a note.

In Romania, the central bank is more hawkish, and last month it kept its benchmark interest rate unchanged for the seventh time running, facing rising fiscal pressures ahead of two elections this year.

All 10 analysts expect the central bank to keep interest rates on hold at a record low 1.75 percent on Thursday. The majority expects rates to stay at their current level by the end of March 2017.

In Poland, the zloty, which has been under pressure this year due to fears over the impact on banks of a bill to convert Swiss franc-denominated mortgages and political concerns over the new government's measures, was flat ahead of the rate decision on Friday.

The Polish central bank will decide on interest rates on Friday. In April the bank kept its benchmark rate unchanged at a record low of 1.5 percent. Some market players are pricing in a cut this year.