×

CEE MARKETS-Leu falls on pension reform fear, Polish stocks rally

* Romania mulls downsizing private pension funds Leu falls 0.3 pct, stock and bond market reaction muted

* Warsaw's bluechip stock index highest since May 2015

(Recasts with possible Romanian pension reform, Polish PM) BUDAPEST, Aug 25 (Reuters) - The leu hit two-month lows on Friday after Romania's government said it may downsize private pension fund contributions from next year, which could hurt demand for Romanian assets. Romanian private pension funds invest mainly into government debt, and partly into stocks. Earlier moves by the Hungarian and Polish governments in the past few years to nationalize private pension funds have weighed on local markets. Warsaw stocks, meanwhile, hit multi-year highs, benefiting from healthy economic figures from Poland and Central Europe and a positive sentiment in European markets. Romanian Prime Minister Mihai Tudose said his government was analyzing whether to cut contributions to mandatory private pension schemes and redirect some of the funds into state coffers. The leu fell 0.3 percent to 4.598 versus the euro beyond the 4.6 line. Reaction in the domestic bond and stock markets was muted as there have been rumors about the pension fund plans in the past days, and the Romanian government also has a track record of zigzags in policy planning. Elsewhere, Budapest stocks traded just off the record highs hit on Thursday. Warsaw's bluechip index, the best performer in the region this year with 27 percent gain since 2026, rose 0.7 percent. It touched its highest levels since May 2015 and the index which also takes dividends into account set a 10-year high. Polish shares are picking up after underperforming regional peers last year when the policies of the conservative Law and Justice Party, which took power in late 2015, hit various sectors including banks. Its policies have become less painful to businesses, even though Polish assets repeatedly came under pressure this year from politics, including tension with Brussels over judiciary reform and a plan to help FX borrowers at the cost of banks. Central Europe's robust economic performance still buoys its currencies and equities. Polish consumer confidence hit an all-time high in August according to late Thursday's data. The zloty firmed slightly to 8-day highs against the euro. It got support from comments by Prime Minister Beata Szydlo that the government will not breach the European Union's budget deficit threshold, 3 percent of economic output. Some investors who sold the forint may have also bought zloty instead, market participants said. The forint plunged one percent against the euro to a 2-week low from a 28-month high on Thursday after the Hungarian central bank flagged further monetary easing. On Friday it eased 0.1 percent from its previous close, but some dealers said good economic fundamentals could again lift it soon.

CEE MARKETS SNAPSH AT 1415 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.088 26.106 +0.07 3.52% 0 5 % Hungary 304.66 304.42 -0.08% 1.37% forint 00 50 Polish zloty 4.2601 4.2622 +0.05 3.38%

%

Romanian leu 4.5980 4.5836 -0.31% -1.37% Croatian 7.4150 7.4135 -0.02% 1.89%

kuna

Serbian 119.06 119.26 +0.17 3.60% dinar 00 00 % Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Prague 1035.1 1034.1 +0.10 +12.3 5 5 % 2% Budapest 37898. 37954. -0.15% +18.4 20 41 2% Warsaw 2474.1 2456.2 +0.73 +27.0 6 7 % 2% Bucharest 8384.8 8348.7 +0.43 +18.3 1 6 % 5% Ljubljana 826.56 828.68 -0.26% +15.1

9%

Zagreb 1898.3 1903.4 -0.27% -4.84% 0 7 Belgrade 726.72 722.78 +0.55 +1.30 % % Sofia 712.56 718.44 -0.82% +21.5

1% BONDS

Yield Yield Spread Daily (bid) change vs change Bund in Czech spread

Republic

2-year -0.021 0.005 +070b -1bps

ps

5-year 0.056 0.015 +035b +0bps

ps

10-year 0.901 -0.032 +050b -6bps

ps Poland

2-year 1.735 -0.008 +246b -2bps

ps

5-year 2.64 0.016 +294b +0bps

ps

10-year 3.316 0.012 +292b -1bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.61 0.72 0.81 0

IBOR=>

Hungary <BU 0.19 0.25 0.31 0.15

BOR=>

Poland <WI 1.765 1.789 1.829 1.73

BOR=

Note: FRA are for ask quotes prices ******************************************************** *****

(Additional reporting from Luiza Ilie in Bucharest/Bartosz Chmielewski in Warsaw; Editing by Alison Williams)