Better-than-expected ZEW index supported the region

ANALYSIS | 11/19/2014 10:07:41 GMT

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Better-than-expected ZEW index supported the region

New tax hikes passes in the Hungarian Parliament

Better than expected the German ZEW index support positive sentiment in the region. The Czech koruna, Polish zloty as well as the Hungarian forint strengthen. The biggest gains recorded the Hungarian forint, which firmed by 0.4 % and remained around the strongest levels in 5 months. Also the Hungarian auction of 3-month discount Treasury bills was successful, when attracted strongest demand from August. Although bids four times exceeded offered amount, the Government Debt Management Agency (AKK) did not increase its offer and sold 3-month treasury bills worth of HUF 30bn with average yield at 1.62 % (9 bps lower than at the auction last week).

The optimism prevails on Hungarian markets in spite of a new tax law, passed on Tuesday and a new controversial bill proposal from Economy Minister Mihaly Varga banning the operations of hypermarkets and supermarkets. Regarding new tax law, Hungary again imposes special taxes, this time on soap, alcohol, advertising and supermarkets (internet tax was after protests excluded). Hungary has been abundantly criticized for special sector taxes, which affected mainly foreign companies. Now, there is no doubt that foreign owned firms (retail chains in this case) will be mostly hit again.

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