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Romanian stocks buck rebound, forint leads fx easing

BUDAPEST/WARSAW: Romanian shares, under pressure from recently approved new taxes, bucked a rise of Central European equ

Dec 28 2018

BUDAPEST/WARSAW: Romanian shares, under pressure from recently approved new taxes, bucked a rise of Central European equities on Friday after a recovery continued in Wall Street.

Warsaw's bluechip stock index rose 1.3 percent by 1016 GMT. Bucharest shed 0.75 percent.

Warsaw, one of the best performing equity markets in the world in 2017, is one of the biggest losers among the region's main stock markets this year after Prague, with a 7.3 percent loss.

Bucharest, which was down by 4.7 percent from the end of 2017, turned a robust 8 percent year-to-date gain into a loss last week, after the government announced a plan to launch new taxes on sectors including banks.

The final plan approved late on Friday scaled back the tax rise somewhat. A temporary relief rally followed, but Romanian shares continued to weaken after the Christmas holidays.

Central European currencies including the leu eased against the euro, led by the forint which shed 0.3 percent. Trading at 321.75 it was still near its 200-day-moving average.

"It is positioning ahead of the year's last (daily) fixing," a Budapest-based dealer said, adding that the government's 2019 financing plan published on Friday had no impact.

The government said it planned to finance 2019 foreign currency debt expiries entirely from domestic markets.

The plans did not affect the government bond market either, which was idle in the last session of the year, after a plunge in long-term yields in the third quarter as a decline in crude prices reduced inflation.

Hungary's 10-year bond yield was quoted around 3 percent in the bourse, its lowest level since May.

Slovenia released the region's first December 2018 inflation data on Friday. The figures showed a plunge in annual inflation to 1.4 percent from 2.1 percent in November.

Poland's parliament was expected to pass legislation later on Friday to keep power prices flat next year instead of raising them, a move that could keep a lid on inflation and help the central bank hold interest rates at record lows longer.

Poland's 10-year bond yield traded at 2.8215 percent, a tad higher, tracking its US peer while staying near Thursday's 2-year lows.

Some funds may continue to buy Polish bonds early next year, but abundant supply can keep yields in balance, mBank dealer Mateusz Milewski said.

The zloty could stay near 4.29 against the euro in the short term, but the exit of Britain, a key trade partner of Poland, from the European Union next year poses risks to the unit, Bank Millennium financial markets analyst Mateusz Sutowicz said.

Copyright Reuters, 2018