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CEE MARKETS-Prague leads stocks fall as government may tap bank dividends

Sandor Peto

* Czech PM says banks should pay part of dividends into a fund

* Czech bank stocks fall again, pushing index lower

* Global risk aversion weighs on CEE currencies, stocks

BUDAPEST, May 6 (Reuters) - Prague led a decline in Central European equities on Monday after Czech Prime Minister Andrej Babis said banks should pay part of their dividends into a new state development fund. Last week also started with a plunge of Czech bank stocks due to government discussions of ways how to make up for the revenue loss in the budget from a slowdown in economic growth. Prague's main index almost fully recovered last week from a fall to this year's lowest levels after Babis clarified that he did not support a new tax on bank assets proposed by the junior ruling party, the Social Democrats. But Babis said on Sunday Czech banks should pay up to 20 percent of their dividends into a new state development fund.

The main index fell 1.1 percent, driven lower by a decline in the stocks of Erste, Komercni Banka and Moneta Money Bank. Austrian-based Erste reported a 12 percent increase in net profits in the first quarter on Friday thanks to solid lending in its core markets including the Czech Republic and Austria.

Equities eased across Central Europe as risk appetite got hit in global market by a renewal of trade tensions between the United States and China. Warsaw's bluechip index fell by 1.1 percent to a 4-month low. Regional currencies also mostly eased, with the most liquid zloty and the forint shedding 0.2 percent against the euro, trading at 4.2843 and 323.65, respectively. The forint was still off the 5-month lows it set last week amid concerns that inflation may rise to around the top of the Hungarian central bank's (NBH) 2-4 percent target, raising questions about the credibility of the bank's policy. The NBH increased its overnight deposit rate and announced some liquidity tightening in forint markets in March, but also dropped its guidance for gradual monetary tightening. Hungarian retail sales figures released on Monday showed a slowdown in annual growth to 5.9 percent in March from 8.4 percent in February. But the slowdown is caused by base effects, analysts said. "Given strong consumption figures published for the first quarter, as well as surprising resilience of industrial performance to global economic slowdown, the 1Q19 GDP figures might have been fairly strong, and might approach again 5% y/y in the January-March period," Erste analyst Orsolya Nyeste wrote in a note.

CEE SNAPSHOT ATMARKETS 1108 CET

CURRENCI ES

Latest Previous Daily Changebid close change in 2019Czech <EURCZK= 25.7080 25.7200 +0.05% -0.00%crown >Hungary <EURHUF= 323.6500 323.0700 -0.18% -0.79%forint >Polish <EURPLN= 4.2843 4.2771 -0.17% +0.12%zloty >Romanian <EURRON= 4.7545 4.7515 -0.06% -2.11%leu >Croatian <EURHRK= 7.4120 7.4155 +0.05% -0.03%kuna >Serbian <EURRSD= 117.8200 118.0000 +0.15% +0.41%dinar >Note: calculated from 1800 CET

daily change

Latest Previous Daily Changeclose change in 2019Prague 1067.66 1079.630 -1.11% +8.22%

0

Budapest 41456.63 41775.36 -0.76% +5.92%Warsaw 2293.04 2319.08 -1.12% +0.72%Bucharest 8414.11 8443.43 -0.35% +13.96%Ljubljana <.SBITOP 884.04 886.26 -0.25% +9.92%>Zagreb 1835.99 1843.50 -0.41% +4.99%Belgrade <.BELEX1 743.36 743.15 +0.03% -2.41%

5>

Sofia 571.30 571.30 +0.00% -3.90%

BONDS

Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=R 1.6180 0.0210 +222bps +2bps

R>

5-year <CZ5YT=R 1.7630 0.0160 +219bps +2bps

R>

10-year <CZ10YT= 1.8810 -0.0030 +187bps +1bps

RR> Poland

2-year <PL2YT=R 1.6960 -0.0090 +230bps -1bps

R>

5-year <PL5YT=R 2.3560 -0.0180 +278bps -1bps

R>

10-year <PL10YT= 3.0260 -0.0170 +302bps -1bps

RR>

FORWARD RATE AGREEMEN

T

3x6 6x9 9x12 3M

interban k

Czech Rep 2.24 2.26 2.26 2.20

<PRIBOR=

>

Hungary 0.34 0.52 0.70 0.16Poland 1.75 1.77 1.80 1.72

Note: FRA are for ask prices quotes

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(Reporting by Sandor Peto Editing by Mark Heinrich)