February 28, 2014 / 10:12 AM / in 4 years

CEE MARKETS 1-FX, stocks mildly positive but Ukraine worries linger

* Forint leads currency gains
    * Polish GDP up 0.6 pct q/q, little reaction
    * Hungary investments rose 14.9 pct in Q4

    BUDAPEST, Feb 28 (Reuters) - Central European currencies and
stocks opened flat to slightly stronger on Friday but traders
said cautious sentiment would persist as investors kept an
uneasy eye on developments in neighbouring Ukraine.
    Hungary's forint led currencies in early trade
with a 0.3 percent gain versus the euro, tracked by the Polish
zloty, the region's most liquid currency, which added
0.2 percent by 0911 GMT.
    Fourth-quarter Polish economic growth of 0.6 percent
quarter-on-quarter and 2.7 percent year-on-year virtually
matched flash estimates and had no market impact. Dealers did
not expect much volatility unless tensions in Ukraine's Crimea
region escalate further.
    Data showed investments in Hungary rose by an annual 14.9
percent in the fourth quarter following a 9.8 percent increase
in the third quarter in a boon to central Europe's most indebted
economy. 
    "The favourable interest rate environment and the National
Bank of Hungary's Funding for Growth Scheme have helped
kick-start investments," the Economy Ministry said in a
statement.
    Raiffeisen Bank analyst Zoltan Torok said the central bank
programme, which provides cheap loans to companies via
commercial banks, would probably give private sector investments
a further push in the coming quarters.
    "We are bouncing up and down around the 310 per euro level.
We are looking at Ukraine but right now there is some
wait-and-see attitude by investors," a Budapest-based currency
dealer said.
    "But if anything serious were to happen, we would also take
a hit," the trader said. Another dealer said the forint would
probably remain in a 309.5-311 range to the euro on Friday in
low turnover.
    Even though the region has thin trade links with Ukraine,
the neighbouring country's crisis has sent a shockwave through
the region's markets and debt default or a military conflict in
Ukraine could deepen the slide in asset prices.
    Contagion from Ukraine is the latest setback for central
European markets, which have been hit this year by risk aversion
as the U.S. Federal Reserve began slowing its money printing.
    On Friday stock markets posted modest gains, led by a 1.4
percent increase in Budapest shares. Stocks in central
Europe's biggest independent lender OTP rebounded from
Thursday's falls to gain 2 percent.
    But a fall in shares in Erste Bank, which is also
listed in Prague, dragged down stocks in the Czech Republic
 after the lender earlier reported a drop in net profit.
Erste and energy company CEZ are the biggest listed companies on
the Prague exchange. 
    The Romanian leu, which has been backed by central
bank interventions, was steady in early trade.
    Romania's President Traian Basescu may approve the latest
review of an aid deal led by the International Monetary Fund
later on Friday.
    Basescu had previously refused to approve the review of the
precautionary, 4 billion euros aid deal because it included an
additional tax on fuels and a government plan to support low
income borrowers - policies he opposed.    
    The finance ministry is also expected to unveil domestic
debt issuance plans for March. Debt managers sold 1.93 billion
lei ($586.91 million) of leu-denominated debt in February.
    "As recent political tensions seem to have gone past the
tipping point, an early RON firming to 4.50/EUR gained further
steam to 4.49/EUR at the end of yesterday's session due to a
rebound in the regional climate," INB Bank in Bucharest said in
a note.
    "The RON is nonetheless eyeing 4.50/EUR this morning and we
still expect the local currency to stick to softer ground up to
4.51/EUR today, with a rebound probable when the new government
in the making will be announced on Monday," it said.
    The Serbian dinar was unchanged after the central
bank sold 10 million euros in Thursday's session.
                  CEE MARKETS SNAPSHOT AT 1011 CET
 ************************** CURRENCIES ************************
                             Latest  Previous   Daily   Change
                             bid     close      change  in 2014
 Czech crown                 27.329    27.325   -0.01% +0.01%
 Hungarian forint           309.680   310.700  +0.33%  -4.10%
 Polish zloty                 4.159     4.167   +0.19%  -0.23%
 Romanian leu                 4.496     4.497  +0.03%   -0.79%
 Croatian kuna                7.649     7.653   +0.05%  -0.41%
 Serbian dinar              115.830   115.920   +0.08%   -1.15%
 Note: daily change calculated from previous close at 1700 GMT
 **************************** STOCKS **************************
                             Latest  Previous   Daily   Change
                                     close      change  in 2014
 Prague                      1014.33    1014.43   -0.01% +2.78%
 Budapest                  17625.09  17376.42   +1.43%   -3.87%
 Warsaw                     2489.64   2467.90   +0.88% +3.55%
 Bucharest                  6417.39   6374.54  +0.67%   -0.93%
 ******************* FORWARD RATE AGREEMENTS ******************
                              3x6     6x9    9x12  3M interbank
 Czech Rep                    0.400   0.470  0.500   0.37
 Hungary                      2.980   3.360  3.600   2.75
 Poland                       2.740   2.780  2.900   2.71
 Note: FRA quotes are for ask prices
 **************************************************************
 
    ($1 = 3.2884 Romanian leus)

 (Reporting by Reuters bureaus; Editing by Susan Fenton)

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