Review
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Yesterday, PMI for February published across the EMEA region provided a rather mixed picture. Even though the Polish PMI rose further in February to 52.4 (up from January’s 51.0), the increase was smaller compared to its regional peers and it is clearly now lagging the Czech and Hungarian PMI. In any case, we must admit that such a strong rise in Hungarian PMI in February to 55.9 (up from January’s 53.5) is hard to understand, as no other Hungarian data shows that there should be such a strong recovery underway in Hungary. Also, the South African PMI in February rising to 60.4 (up from January’s 53.6) seems too good to be true. Somewhat disappointingly, Turkish and Russian PMI dropped to 50.9 and 50.2 respectively. It is particularly surprising that the Russian manufacturing sector continues to disappoint despite the continued rise in oil prices.
Yesterday there were warnings about increasing risks to the Romanian banking sector. This follows reports last week from both the Romanian central bank and commercial banks that bad loans are rising fairly sharply in Romania. The largest banks in Romania are Austrian and Greek-owned banks. The news flow concerning Romanian banking is clearly concerning and indicates that the bad loans have not peaked in South East Europe. Last week we put out a comment on the increased risks in South Eastern Europe.
Preview
- Polish Q4 09 GDP is the key economic number due for release today. We expect to GDP to have grown 3.0% y/y in Q4 – in line with the consensus expectation.
Trading update
- The Polish zloty outperformed its regional peers yesterday. This is completely in line with our EMEA FX Scorecard, where the zloty is the only currency of five covered that has a positive score and as such the strengthening of the zloty is justified. Our trade recommendation of Buy PLN/HUF continues to perform well.
