Equities: Orange Polska results in-line

Macro, FX, Rates: Hungary's unemployment falls further

(HU) Macro: The Hungarian unemployment rate decreased further in the period of April and June to 4.3%. It means that there is less than 200thousand people who are unemployed, which is the lowest read in this century. The only problem that there are still roughly 200thousand people who are employed in the public forced work program, although at least we can identify some slow moderation of the numbers in this group. Also positive news is that the activity rate is increasing. In the age group between 15 and 74 the activity ratio (the numbers of those people who would like to work) increase to 61.8% from 61% a year ago. So the general demand for labor force is still quite strong, especially in this period of the year when there is strong demand for seasonally workers (in agriculture, construction, tourism etc.). So we expect that the unemployment rate may moderate slightly below 4% in the next 6 months.

Despite of the quite impressive labor market figure we have to highlight that there are heavy problems of the structure of labor demand and supply, as there is lack of appropriate, skilled labor force in many sectors, which won't be solved in the near future. It means that the over demand in these sectors may keep wage increase on an elevated level – this year around 10% YoY, while around 9% in 2018 – which on one hand may put pressure on inflation and on other hand increases the risk that without enough investment and productivity increase the Hungarian competitiveness may deteriorate. The latter might be more and issue in 2019, while the former already in 2018.

Despite of the tight labor market, we expect that the NBH may remain dovish in the coming months especially the EUR/HUF is trade close to 305. The NBH might be unhappy with the current strong level of the HUF so we maintain our view that the cap of the 3-month deposit might be moderated further in September. We see chance now for EUR/HUF moving to its one-year low levels around 303 in the coming weeks, but we expect the HUF weakening for the autumn time back to around 315 levels.

Equities: Orange Polska results in-line

(PL) OPL: Orange Polska reported its consolidated results for 2Q17 yesterday. At first glance reported numbers were completely in line on top line, but strongly beat on both operating and bottom lines. While beat on bottom line was caused by lower tax (PLN 12mn in 2Q17 vs. PLN29mn in 2Q16) combined with lower depreciation (PLN 642mn in 2Q17 vs. PLN 683mn in 2Q16) due to extension of useful life of certain fixed assets (PLN 42mn), beat on operating level seems to be little bit more valuable as resulted from 11% y/y drop in commercial expenses (total operating costs were lower by 2.5% y/y). On the other hand, fibre net adds at only 28t in 2Q17 were still very low in our view.

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