This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Hungary's News Means Pressure for HUF

NEW YORK ( BBH FX Strategy) -- There were two notable events for Hungary since the start of the week: The results of Hungary's first auction under the new two-year loan facility, and the resignation of President Pal Schmitt, a supporter of the ruling Fidesz party. Neither event had an initial market impact, but both could have potential consequences for Hungarian assets going forward.

The take up for the first auction of the Hungarian mini-Long Term Refinancing Operation facility was lower than expected at HUF 56 billion (expectations were for as much as HUF100 billion). As widely reported, the weak demand was attributed to the comfortable cash position by local banks and their reluctance to accept the conditions associated with using the facility.

The Hungarian capital, Budapest

Recall that banks borrowing from the facility must keep gross outstanding loans to the corporate sector at or above the December 2011 levels during the two-year term of the loan. That said, we think the establishment of this facility was an important gesture that will be much appreciated if funding conditions tighten once again.

Follow TheStreet on Twitter and become a fan on Facebook.

The fact that banks have ample liquidity but many are not willing to commit to higher lending is hardly a vote of confidence for the Hungary economy. Data of Hungary has been mixed, but the last PMI reading showed a sharp increase to 56.8, the highest since February of last year.

Also of note, last year's budget deficit target is being hotly debated. To start, it was inflated by one-off items such as a large transfer of private pension fund assets. But critics also claim that the adjusted deficit of 2.43% of GDP was also inflated through accounting tricks, which allowed it to beat the targeted deficit of 2.94% of GDP.

The resignation of President Schmitt -- accused of plagiarism during his Ph.D. thesis -- represents a blow to Prime Minister Orban. The ruling Fidesz party holds a comfortable majority in the parliament, but this event could reduce Orban's personal support within the party.

The key question is whether this will impact the IMF negotiations in any way. We are inclined to think a weaker Orban, with less freedom, is more likely to give in to IMF/EU demands rather than double down on his antagonistic posture. We prefer to wait until the new president is announced on April 16 to draw any conclusions.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $131.54 -0.38%
FB $80.24 -0.38%
GOOG $539.90 0.02%
TSLA $251.07 1.50%
YHOO $43.28 -0.23%

Markets

DOW 18,099.13 -63.86 -0.35%
S&P 500 2,116.67 -6.81 -0.32%
NASDAQ 5,089.7260 -16.8670 -0.33%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs