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CEE MARKETS-Hungarian forint recovers, OTP shares plunge

* Forint recovers from its lowest in five months

* Hungarian debt rally loses steam as forint slumps

* OTP shares fall almost 5 percent

* Politics weigh on zloty, investors shift to short-term bonds

* Czech central bank may raise rates again

(Adds OTP Bank shares fall, Polish bonds, trader comments) BUDAPEST/WARSAW, Sept 26 (Reuters) - The forint regained some ground on Tuesday, after weakening since the central bank loosened monetary policy a week ago, but it remained near five-month lows. Banks have also been hit by the central bank's moves and OTP shares fell on Tuesday, plunging 4.6 percent to 9,711 forints by 1344 GMT, as stop-loss selling emerged once it broke 10,000. It knocked down Budapest's main stock index, which fell 1.5 percent. Some of the selling in OTP may have come from French insurer

Groupama , which in March sold a 3 percent stake in

the bank, and said it would sell more shares after a 180-day lockup, traders said. Hungary's central bank last week lowered its inflation forecasts, cut its overnight deposit rate, pledged liquidity-boosting measures and on Monday held a foreign-exchange swap auction to provide banks with forint liquidity. Those measures combined to cause the forint to fall on Monday, before stabilising on Tuesday. It was up 0.2 percent at 310.84 by 1313 GMT. But a bond rally petered out as the currency weakened and the forint stayed near its weakest levels since early May. With the currency's 310 resistance broken, 315 could be the next target, Erste analysts said in a note. In general, Central Europe's economic growth and subdued inflation have helped buoy the region's assets, although political risks weigh on the Polish zloty and the Romanian leu. Inflation has risen above targets only in the Czech Republic. A Reuters poll showed most analysts expect the Czech central bank to raise interest rates either at its meeting on Wednesday or, more likely, in November. But a large number of outstanding long positions is keeping investors cautious, and the crown remains on the weak side of 26 to the euro. Polish inflation figures for September, due on Friday, will be a key indicator of regional inflation trends. The zloty eased slightly to 4.2844 against the euro, after some jitters on Monday when Polish President Andrzej Duda presented proposals for an overhaul of the judiciary system. Earlier, he had vetoed government bills on judiciary reform, which had raised worries over the rule of law in Poland. Duda's own proposals may maintain tension with the European Union over the issue. Some investors have sold long-term Polish government bonds and bought short-term bonds instead. That shift suggests rising concerns about local and global political risks, which may weaken the zloty again towards 4.3 versus the euro, traders said.

CEE MARKETS SNAPSH AT 1513 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.030 26.054 +0.09 3.75% 0 5 % Hungary 310.84 311.51 +0.22 -0.65% forint 00 00 % Polish zloty 4.2844 4.2806 -0.09% 2.79% Romanian leu 4.6000 4.5989 -0.02% -1.41% Croatian 7.4910 7.4835 -0.10% 0.86%

kuna

Serbian 119.35 119.30 -0.04% 3.35% 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 1044.5 1041.4 +0.29 +13.3 3 9 % 4% Budapest 37575. 38107. -1.40% +17.4 52 87 1% Warsaw 2447.4 2453.1 -0.23% +25.6 0 5 4% Bucharest 7927.0 7888.6 +0.49 +11.8 5 4 % 8% Ljubljana 799.82 802.66 -0.35% +11.4

6%

Zagreb 1815.3 1819.3 -0.22% -9.00% 8 6 Belgrade 723.64 724.02 -0.05% +0.87

%

Sofia 682.49 680.87 +0.24 +16.3 % 8%

BONDS

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

Republic

2-year 0.078 0.023 +078b +3bps

ps

5-year 0.174 -0.013 +047b -2bps

ps

10-year 1.121 0.015 +071b +0bps

ps Poland

2-year 1.689 0.01 +239b +2bps

ps

5-year 2.62 0.01 +292b +0bps

ps

10-year 3.306 0.012 +290b +0bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.75 0.86 0.95 0

IBOR=>

Hungary <BU 0.07 0.08 0.12 0.04

BOR=>

Poland <WI 1.76 1.82 1.87 1.73

BOR=>

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

($1 = 263.5500 forints)

(Additional reporting from Warsaw, editing by Larry King and Susan Fenton)