Bulls rage in Budapest, stock market up 7% (2)

PORTFOLIO.HU

Monday, August 24, 2009 06:05:00 PM

(Adds details)
Optimism has prevailed in global financial markets on Monday, with steady buyer pressure despite the lack of major macro reports. In contrast with the moderate gains in Western Europe's stock markets, the CEE region has witnessed massive stock price hikes, with the Budapest Stock Exchange ahead of peers in a bid to catch up with market trends during the past week's bank holidays in Hungary. The BUX index of the Budapest bourse rose 6.6% since the last trading day and stood at 19,416 at the closing bell; the highest in 11 months. The present value of the index is more than twice as high as in March. Skyrocketing stock prices were coupled with trading volume far above average, with a total of HUF 40.4 billion worth of stocks changing hands during the day. The top priority news of the day is the National Bank of Hungary's 50-bp rate cut, however this has failed to create excitement in financial markets.

The opening bell in US markets has given a new boost to stock markets worldwide, with overseas stock indices currently up about 1% just as their Western European peers at closing time. This is not sensational in itself, however it should be noted that all developed market indices are standing at a new local peak. Intense stock market gains have continued in the CEE region today, Budapest stood out as the top performer after missing out on two bullish trading days last week due to a bank holiday. The BUX index jumped 6.6% since Wednesday, hitting a new local high.

The region's other stock markets have likewise put in a good performance; Russia's RTS gained 4.2% owing to the rise of oil prices to this year's highest level; PX in the Czech Rep and Poland's WIG rose 4.9% and 2.5%, respectively. JP Morgan has released a highly optimistic report on Czech, Polish and Hungarian stock markets, swiftly moving stocks from underweight to overweight rating. Analysts believe narrowing credit spreads and economic upturn in the eurozone may serve as a catalyst of growth in these countries.

Among the Hungarian blue chips, OTP led the field with 9.9% gain since Wednesday, the stock closed at HUF 4,999 - of course, a new local peak. Along with worldwide optimism, a new target price of HUF 5,800 by Nomura and an increased 2009 profit forecast by Concorde may have been contributors to the breathtaking rally. The spectacular rise was coupled with higher than average trading volume, with HUF 29.3 billion worth of stocks traded in Budapest today.

While OTP exceeded all regional peers, it should be noted that Raiffeisen and BRE Bank both gained almost 7% without a trading break last week.

The other blue chips have also made substantial gains at the Budapest bourse today, with the stocks of Richter and MOL climbing 6.6% and 3.8%, respectively. The latter has broken out of the earlier trading range, at 14,400 the oil company's share price is at its highest since May. Oil industry investors have been generally optimistic throughout the region, which is no surprise considering the fact that over USD 74.50, the price of oil is at its highest so far in 2009.

Among MOL's regional peers, Czech Unipetrol was the top winner of the day after shooting up 8.8% overnight on rumours that Poland's PKN Orlen is considering the sale of Unipetrol to a Russian investor or the Czech state. However, PKN has denied the existence of such plans. PKN stocks have gained 3.1% today.

Magyar Telekom has not failed to take part in the bullish trend, with a 5.9% jump in the share price on Monday. Priced on a dividend basis, the stock benefited from a 50 bp rate cut and a major 44-bp drop in 10-year government bond yields, although for the most part these had been priced in earlier. Magyar Telekom stood out from the rest of the region's telecom stocks, among which Czech Telefonica and Polish TPSA gained 4% and 0.3%, respectively. The latter may have been negatively impacted by Erste Bank's lowered target price from the earlier PLN 20.5 to PLN 17.7.