CEE MARKETS 2-Poland's TPSA extends loss, stocks fall

Tue Dec 10, 2013 11:31am EST

* TPSA falls after news on big staff cut
    * CEE equities track western peers lower on Fed tapering
expectations
    * Currencies keep early gains, regional assets still
attractive

 (Adds late stock price falls)
    By Sandor Peto
    BUDAPEST, Dec 10  (Reuters) - Shares of TPSA 
extended losses on Tuesday after plunging the previous day on
news the Polish telecoms firm planned to lay off 15 percent of
its workers as an economic slowdown bites into its revenues.
    The stock had initially regained some ground, but was down 2
percent by 1536 GMT as falls in global equity markets hit
Central European shares.
    While growing expectations the Federal Reserve will curb its
monetary stimulus soon knocked stocks, Central European
currencies clung to recent gains as the region's forecast
economic recovery makes its assets more attractive. 
    Poland's economy, the only one in the European Union to
avoid a recession after the 2008 global crisis, has been hit by
slowing growth but is expected to make a gradual recovery.
    Shares in TPSA, Poland's dominant fixed-line
telecoms operator, had fallen 6 percent on Monday after the firm
said it could lay off up to 2,950 staff by the end of
2015. 
    TPSA is a unit of Orange, and Poland is the French
firm's biggest foreign market.
    Societe Generale analyst Leszek Iwaszko said the fall was
surprising as cost cuts could be good news if severance payments
are not too high.
    But he also warned that investors should not bet on TPSA
based on the Polish recovery story. 
    "An improvement in the economy could help TPSA results in
some way. But the telecoms market (has) its own rules, facing
strong competition and price wars," he said.
    The crisis years have also affected the business of Deutsche
Telekom's Hungarian unit, Magyar Telekom.
    The Hungarian firm announced last week that it probably
wouldn't pay a dividend on 2013 results, a surprise to investors
who had bought the stock partly on the assumption that they
would receive such a payout.
     The stock eased 0.3 percent on Tuesday to 294 forints, even
though Erste Bank lifted its target price to 300 forints in a
note, saying no more negative news was expected.
    "We expect the firm not to pay a dividend until 2016 as its
gearing rate will be higher than the 40 percent threshold set as
a condition," it said, adding that investments into mobile phone
frequencies would lift Telekom's debt.
    
    CEE ASSETS STILL ATTRACTIVE    
    Central European economies are regaining their strength as
their export markets in the West recover. But the process has
been slow and painful, with unemployment rates remaining high
and consumers' wallets thinner than a few years ago.
    Commerzbank said in a note that the coming year - when
global liquidity could drop and financing costs rise - could be
challenging to many currencies in emerging markets.
    "You take the low road and I take the high road," it said.
"TRY (Turkish lira), ZAR (rand) and RUB (rouble) will likely
find the going rough, whereas PLN (zloty), CZK (Czech crown) and
HUF (forint) will fare somewhat better."  
    The forint led currency gains on Tuesday, firming
0.4 percent to 300.9 by 1537 GMT. One dealer said it could tread
water until next week when some significant options deals are
expected to expire at strike levels of about 302. 
    The crown firmed 0.3 percent, after shedding more
than 6 percent in the past month because the Czech central bank
sold it, fighting to help lift the economy from recession.
    The Czechs reported a trade surplus for October, and a
positive trade balance usually signals continuing low domestic
economic activity in the region, but the figures also showed
that imports slightly outgrew exports. 
    "Companies react to previous extremely low level of stocks.
Stocks increase is a harbinger of the future growth of industry
and exports, it also shows in GDP," said Pavel Sobisek, chief
economist at UniCredit in Prague.
    "We stick to our opinion that the economy will put up solid
growth in the fourth quarter, only its structure might shift to
domestic demand from foreign (demand)," he said. 
                  CEE MARKETS SNAPSHOT AT 1637 CET
 ************************** CURRENCIES ************************
                             Latest  Previous   Daily   Change
                             bid     close      change  in 2013
 Czech crown                 27.415    27.497  +0.30%  -8.63%
 Hungarian forint           300.900   301.980  +0.36%  -3.30%
 Polish zloty                 4.178     4.184   +0.13%  -2.50%
 Romanian leu                 4.448     4.450  +0.04%   -0.11%
 Croatian kuna                7.641     7.641    0.00%  -1.18%
 Serbian dinar              114.850   114.880   +0.03%   -2.22%
 Note: daily change calculated from previous close at 1600 GMT
 **************************** STOCKS **************************
                             Latest  Previous   Daily   Change
                                     close      change  in 2013
 Prague                      971.79    972.47   -0.07%  -6.44%
 Budapest                  18220.61  18244.96    -0.13%  +0.26%
 Warsaw                     2453.61   2478.77    -1.02%  -5.01%
 Bucharest                  6226.23   6355.81   -2.04%  +20.91%
 ***************************** BONDS **************************
                         Yield    Yield    Spread    Daily
                         (bid)    change   vs Bund   change in
 Czech Republic                                      spread
   2-year                0.972   +0.206   +75bps    +21bps
   5-year                0.833     -0.022   +3bps      -2bps
  10-year                2.250    -0.023   +42bps     -1bps
 Hungary
   3-year                4.130     0.000   +378bps    0bps
   5-year                4.790     -0.010   +399bps    0bps
  10-year                5.740   +0.020    +391bps   +3bps
 ******************* FORWARD RATE AGREEMENTS ******************
                              3x6     6x9    9x12  3M interbank
 Czech Rep                    0.355   0.470  0.460   0.38
 Hungary                      2.960   3.020  3.125   3.17
 Poland                       2.680   2.720  2.830   2.65
 Note: FRA quotes are for ask prices
 **************************************************************
 
 (Reporting by Reuters bureaus; Editing by Catherine Evans)
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