February 11, 2019 / 11:03 AM / 6 months ago

CEE MARKETS-Romanian stocks resume fall, central bank warns over deficit

    * Romanian bank tax worry returns, bank stocks fall again
    * Romanian central bank chief warns over C/A, bank tax
    * Other stock indexes in CEE track rise in Asia, Europe

    By Sandor Peto
    BUDAPEST, Feb 11 (Reuters) - Romanian bank stocks resumed a
fall on Monday as central bank (NBR) governor Mugur Isarescu
clashed with the government over the draft 2019 budget which
includes a new tax on banks.
    The plan, which also increased taxes on energy firms to
compensate for rising state spending, was first announced two
months ago and caused a plunge in Romanian asset prices.
    Bucharest's main stock index regained some ground
last week amid hopes that talks between the government and the
NBR could make the bank tax less painful.
    But the government approved the draft budget on Friday,
geared towards an increase in wages and pensions, projecting 5.5
percent economic growth. Analysts see about 3 percent.
    The shares of lenders Banca Transilvania and BRD
Groupe Societe Generale fell 6-7 percent in early
trade to one-week lows ahead of a news conference by Isarescu.
    The governor presented the bank's new inflation report, but
also addressed the tax issue, as expected.
    The tax on bank assets has complicated monetary policy as it
is linked with interbank interest rates, while the resulting
worries over the business climate knocked the leu to
record lows versus the euro last month.
    While Isarescu said the leu's reaction was disproportionate,
he warned that consumption boosted by a strong rise in wages was
not in line with output, and that Romania had a growing current
account deficit problem. 
    He said the government should not tie the tax to the ROBOR
money market rates.
    Data released earlier on Monday showed a 12.5 percent annual
increase in the net average wage in December, and a 17 percent
rise in the trade deficit in 2018 to 15.1 billion euros.
    Bucharest's blue-chip stock index was down at 1.8
percent at 1016 GMT, with Banca Transilvania and BRD shares
shedding over 4 percent.
    Central Europe's other main indices tracked Asian and
Western European peers higher, led by a 0.8-percent rise in
    With the dollar approaching 2-month highs versus the euro,
the forint and the zloty -- often sold when
the greenback is bought -- both weakened, shedding 0.2 and 0.1
percent versus the euro, respectively.
    The leu, meanwhile, firmed a shade to 4.7444.
    Isarescu said the bank revised its 2019 inflation forecast
to 3 percent from 2.9 percent.
    Inflation retreated in the region in the past months and
January figures due this week are not expected to show a big
    Romania's government bond yields were mostly lower on Monday
ahead of the auction of a seven-year paper. The 5-year yield was
bid lower by 6 basis points at 4.33 percent.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1116 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.8290   25.8300    +0.00%    -0.47%
 crown      >                                       
 Hungary    <EURHUF=  319.7100  319.2000    -0.16%    +0.43%
 forint     >                                       
 Polish     <EURPLN=    4.3181    4.3131    -0.12%    -0.66%
 zloty      >                                       
 Romanian   <EURRON=    4.7444    4.7475    +0.07%    -1.91%
 leu        >                                       
 Croatian   <EURHRK=    7.4070    7.4045    -0.03%    +0.04%
 kuna       >                                       
 Serbian    <EURRSD=  118.1300  118.2500    +0.10%    +0.14%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1053.09  1046.820    +0.60%    +6.74%
 Budapest             39972.32  39704.61    +0.67%    +2.13%
 Warsaw                2373.86   2354.11    +0.84%    +4.27%
 Bucharest             7418.13   7556.53    -1.83%    +0.47%
 Ljubljana  <.SBITOP    832.52    832.73    -0.03%    +3.51%
 Zagreb                1759.27   1756.88    +0.14%    +0.60%
 Belgrade   <.BELEX1    709.27    710.40    -0.16%    -6.88%
 Sofia                  567.55    575.17    -1.32%    -4.53%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.8650    0.1100   +245bps    +11bps
   5-year   <CZ5YT=R    1.6310    0.0400   +203bps     +3bps
   10-year  <CZ10YT=    1.7000    0.0010   +160bps     -2bps
   2-year   <PL2YT=R    1.5510   -0.0930   +213bps    -10bps
   5-year   <PL5YT=R    2.1800    0.0040   +257bps     -1bps
   10-year  <PL10YT=    2.7260    0.0150   +262bps     +0bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.08      2.11      2.13      1.99
 Hungary                  0.34      0.53      0.68      0.15
 Poland                   1.73      1.73      1.72      1.72
 Note: FRA  are for ask prices                              
 (Reporting by Sandor Peto
Editing by Keith Weir)
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