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CEE MARKETS-Romanian stocks plunge on tax change hurting banks

* Bucharest stocks at 7-week low, Banca Transilvania falls 4.4 pct

* Tax change, unfriendly government rhetoric hits Bucharest banks

* Zloty eases ahead of key flash CPI data

* Crown gives up gain posted on hawkish rate setter comments

BUDAPEST/BUCHAREST, Aug 31 (Reuters) - Banks led Romanian stocks lower on Thursday after the government introduced rules which could lift their corporate tax burden and speculation over other measures that could be brought it. While Central European stocks were mostly rangebound, Bucharest's main index fell 1.9 percent by 0856 GMT, setting 7-week lows. Banca Transilvania shares fell 4.4 percent to two-month lows, continuing to drift off record high levels reached early this month around the publication of strong first-half results. On Wednesday, the government changed the rules for corporate profit tax, by imposing a cap of 30 percent for deductions on divested debt. Analysts have said the change will likely hurt banks, which have massively sold non-performing loans in recent years at a fraction of their original value. Also there was speculation that the government, which is struggling to keep the budget deficit under 3 percent of GDP, may want to impose a small tax on banks' assets. Last week the central bank defended the banking system, saying it was liquid and solvent, after Prime Minister Mihai Tudose said the government may release a list of banks that had not reported profits. Such burdens on banks were also increased in Hungary from 2010 onwards and in Poland last year, including higher taxes and schemes to help troubled borrowers. But tensions between those governments and banks have eased problematic assets accumulated in the 2008-2009 global crisis. Regional economies are continuing to power ahead, partly helped by surging wages as employers fight an exodus of workers into richer Western European countries. Poland published a breakdown of its 3.9 percent second-quarter annual economic growth on Thursday. Comsumption, surging 4.3 percent, could slow later this year. But investments, another key component of economic output, could keep annual growth near a strong 4 percent, Bank Millennium economist Urszula Krynska said. The zloty eased 0.1 percent to 4.2615 against the euro ahead of flash August Polish inflation data, due at 1200 GMT, which can provide clues about price trends in the entire region. The Czech central bank became the first European Union central bank early this month to lift rates since 2012, to react to a rise in inflation to above its target. Hawkish comments from two Czech central bankers lifted the crown to two-week highs of 26.02 on Wednesday, but the currency slid back to 26.098 on Thursday, down 0.2 percent. A weaker currency lifts the prices of imported goods, thus increasing the odds of a new central bank rate hike.

CEE MARKETS SNAPSH AT 1056 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.098 26.053 -0.17% 3.48% 0 5 Hungary 306.11 305.78 -0.11% 0.89% forint 00 00 Polish zloty 4.2615 4.2558 -0.13% 3.34% Romanian leu 4.5920 4.5928 +0.02 -1.24%

%

Croatian 7.4160 7.4125 -0.05% 1.88%

kuna

Serbian 119.10 119.10 +0.00 3.57% 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 1030.7 1028.8 +0.18 +11.8 1 7 % 4% Budapest 37949. 37903. +0.12 +18.5 87 88 % 8% Warsaw 2519.6 2524.5 -0.19% +29.3 9 7 5% Bucharest 8072.8 8226.6 -1.87% +13.9 3 0 4% Ljubljana 816.52 818.09 -0.19% +13.7

9%

Zagreb 1887.7 1888.7 -0.05% -5.37% 8 1 Belgrade 725.98 726.24 -0.04% +1.20

%

Sofia 705.73 706.54 -0.11% +20.3

4% BONDS

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

Republic

2-year -0.08 0.138 +068b +15bp ps s 5-year 0.043 0.002 +038b +0bps

ps

10-year 0.917 0.033 +055b +3bps

ps Poland

2-year 1.712 -0.032 +247b -2bps

ps

5-year 2.631 -0.007 +296b -1bps

ps

10-year 3.309 0.008 +294b +0bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.62 0.74 0.83 0

IBOR=>

Hungary <BU 0.21 0.21 0.26 0

BOR=>

Poland <WI 1.763 1.79 1.821 1.73

BOR=>

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

(Additional reporting by Anna Wlodarczak-Semczuk in Warsaw; Editing by Alison Williams)