ANALYST VIEW - Hungarian gov’t in the dark about market movers - Danske

http://portfolio.hu/en/cikkek.tdp?k=2&i=20242

The comments made by officials of Hungary’s ruling Fidesz party over the past 24 hours not just concerning but tell us that the government has little clue as to how the markets work, Danske Bank said on Friday.

The comments made by Fidesz VPs Mihály Varga and Lajos Kósa, as well as Péter Szijjártó, spokesman for Prime Minister Viktor Orbán, are "highly concerning as they not only increase fears in the markets over a possible Hungarian default, but also clearly demonstrate that the Hungarian government has very little understanding of how the financial markets actually work," commented Lars Christensen, chief analyst at Danske in Copenhagen.

"Furthermore, by so strongly criticising the previous government for going to the IMF, one can only start to speculate as to whether the Hungarian government wants to renege on the country’s standby agreement with the IMF and EU," he added.

In this regard, Christensen pointed out that PM Orbán recently said that he did not want the EU and IMF to dictate economic policy to Hungary.

"With this in mind, Szijjártó’s comments regarding the IMF are even more troubling."

In view of the above, Christensen does not find the sharp sell-off in local markets over the past two days overly surprising.

"If one wanted to ensure financial and economic stability one should not compare the situation with Greece, talk about default and (indirectly) call into question the IMF standby agreement," he said.

"The fact remains that Hungary most likely would have defaulted had the country not gone to the IMF and EU for an emergency loan in 2008."

For now, Danske advises its clients to show "utmost caution" on the Hungarian markets as there is a "clear risk that this could escalate further."

"Furthermore, the "story" is now having a serious negative impact on the wider European markets with the CEE currencies, euro and European fixed income markets coming under pressure," Christensen added.