BUDAPEST/PRAGUE: Romanian stocks touched a 2-1/2-month high on Friday, while other Central European equities markets took a breather after a rally in the first sessions of the year.
After strong gains in 2017, regional stocks rose further in 2018, helped by a global rally, Central Europe's healthy economic output and improved dividends prospects.
Romania's stock index, a regional underperformer last year, leads this year's rise, with 3.1 percent gain from 2017 by 0915 GMT.
Other indices took a breather around psychological levels.
Budapest pierced the 40,000-point line for the first time since Nov. 24. Warsaw retreated behind 2,500 points from Thursday's two-month highs.
Prague set a new 6-1/2-year high.
Analysts saw room for further gains.
"The economy is doing great," said Milan Vanicek, head of research at J&T Banka.
"And there are good dividend yields," he said.
Vanicek said energy group CEZ, trading at its highest since 2015, could rise further, adding that Moneta bank would be his bet for 2018.
"Nice fundamentals, the economy is improving, and there might be already a turnaround in the numbers, meaning not declining but at least steady, and a very nice dividend," he said.
Bank stocks rallied in the region in the past year, partly due to expectations of rising interest rates.
The crown is seen leading continuing regional currency gains this year.
The Czech Republic, where the central bank (CNB) has increased interest rates twice since August, sold Treasury bills on Thursday at a positive yield for the first time in two years.
Czech government bond yields rose by 7-10 basis points on Friday, with the 10-year paper bid at 1.711 percent.
Romania's central bank may become the first to follow the CNB's rate tightening, but Romanian yields have declined this year, with their curve steepening after an end-year government spending spree.
The increased market liquidity is unlikely to prompt action at the Romanian central bank's meeting on Monday as the leu is off its end-2017 record lows, ING analysts said in a note.
"While we expect no change in policy stance, we look for central bank to telegraph February hike," they said.
In Budapest, bond yields traded near record lows and their curve flattened after a plunge on Thursday amid robust demand at the year's first auction.
Long-term yields fell because on Jan. 18 Hungary's central bank will launch long-tenor interest rate swap auctions to help the curve flatten, traders said.
The 10-year paper traded at a yield of 1.89 percent, down six basis points from Thursday's fixing.
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