News
HU: Neutral – Government, banks announce action plan to save FX borrowers -in line with expectations (no agreement on bank tax) (p2)
RU: Mixed – CBR hikes O/N depo rate by 25bp, leaves all other rates unchanged (p2)
TK: Mixed – CBT says it reduces daily FX purchase auction to USD40mn from USD50mn (p1)
Today’s Events
HU: April PPI / TK: April trade balance / PD: Q1 GDP
EEMEA Markets
The Central Bank of Russia (CBR) raised the deposit rates by 25bp (1-day, 7-day, 1M and 3M) at its monthly meeting, choosing to keep all other rates on hold following a surprise hike in the refinancing rate last month. The move confirms the cautious attitude of the bank against a backdrop of sluggish domestic growth, balanced out against inflationary pressures which have been partially tamed by significant RUB appreciation YTD. The move is aimed to remove any excess liquidity from the banking system, and is likely to provide further support to the RUB and limit the pass-through of liquidity on inflation. We also see the CenBank starting to prepare for the release of the grain export ban on Jul 1st, given that domestic grain prices are about 1/2 that on the international markets. This set against a backdrop of capital outflows, USD30bn YTD according to governor Ignatiev, we see the RUB range trading for now.
The CBT reduced the size of its daily FX purchase auctions to USD40mn from USD50mn – marginally positive for TRY but we remain neutral for now The Central Bank of Turkey announced that it will reduce the size of its daily FX purchase auctions from USD50mn per day to USD40mn per day as of today. The bank cited European debt problems and associated less capital inflow into Emerging Markets. Although it is true, the TRY basket at recent lows can not be ignored either. We think this is a marginally hawkish step after last week dovish surprise (as the CBT did not touch RRR) but is clearly not enough to turn structurally bullish on the TRY. We will continue to monitor the daily repo operations to see if the bank is ready to take tighter measures on banking sector liquidity (so far they have increased the repo stock practically funding the higher reserve requirement). We think the short maturity of repos and a slightly more flexible FX purchase auction give the firepower for the CBT to turn around the TRY if they want to. We are not there yet in our view and remain neutral on TRY for the time being.
Finally Hungary has announced a partial agreement with the banks which temporary fixes CHF/HUF rate at 180 and gradually removes the foreclosure ban. No agreement has been reached on the bank tax treatment beyond 2012 and hence on bank lending boosting measures. The details of the agreement are in our view mildly negative; we look to take out our remaining tactical bullish HUF position.
Gyula Toth
UniCredit Research