Prague stocks rebound, Bucharest fails to extend recovery

BUDAPEST/PRAGUE: Sentiment towards central European stocks was boosted on Thursday by an overnight bounce on Wall Street, though technical factors and concerns about tax hikes kept the Budapest and Bucharest markets under pressure.

Romania's blue-chip index was flat, but gave up an initial rise of almost 3 percent. That market has been jittery since the government announced plans for higher business taxes last week to tackle a rising budget deficit.

The index jumped 7 percent on Monday after the government approved a somewhat watered-down version of the package, but failed to extend its recovery on Thursday when the market reopened after the Christmas break.

"(The) new fiscal measures could be insufficient for keeping the budget afloat, because they increase the risk of a severe economic slowdown, hurting ...budget revenues," Erste Group analyst Eugen Sinca said in a note dated Dec. 24.

A 1.2-percent daily fall in Budapest's index pushed it into a year-to-date loss as OTP and other blue-chips weakened through technical support levels.

Prague's main stock index rose 1 percent by 0931 GMT, rebounding from a 1-1/2-year low, but its 30-day performance remained the worst since the middle of 2016.

Romania's leu eased 0.1 percent to 4.647 against euro. The forint was flat, while the zloty firmed 0.2 percent.

"I am not sure that there is an improvement in sentiment overall, with stock indices on a roller-coaster, and year-end position closings causing a mess," one Budapest-based currency dealer said.

The Czech crown rose 0.2 percent, its short-term outlook blurred by calculations on whether commercial banks will choose to cut their crown deposits to reduce year-end payments into a national bailout insurance fund for the sector.

The size of banks' annual contributions to the fund is determined by their crown deposits at the end of Thursday.

"It will be interesting to see what happens close to midnight, the (euro/CZK) rate may go higher, then fall shortly afterward, that's what happened last year," a Prague-based trader said.