The financial markets have largely priced in the Greek developments over the past weeks and the impact of Greece imposing capital controls to stabilise its financial system has been mutes so far on local foreign currency and fixed-income markets, said National Minister of Economy on Monday. The forint hit a five-month high against the euro and bond yields increased, but recouped some of the losses as the EU signalled it was ready for talks.
The contagion of developments in Greece has been muted on Hungary’s currency and bond markets so far as trade and banking links between the two countries are scarce, Varga as telling reporters on the sidelines of a news conference on Monday.
Greece accounted for just 0.4% of foreign trade, there were no Greek big banks present in the country - unlike in Bulgaria or Serbia - and Hungary's finances were much more stable than five or ten years ago.
Varga noted, however, that two impacts of the Greek situation need to be taken into consideration. One is the influence on the forint exchange rate and the other is the effect on government security yields.
Stock markets around the globe fell sharply on Monday in reaction to the news coming from Greece. European bourses got off to an ugly start, plunging 5%, but by mid-day, they pared losses. Sellers dominated the floor on the Budapest Stock Exchange, but losses were below that of Western markets and by the afternoon, the it made up much of its losses. Investors who snapped up OTP shares at the beginning of trade made a hefty gain, as the shares rallied from HUF 5,340 to close to HUF 6,000 around 3 pm.
The forint weakened against major currencies, losing three units. Against the euro it was trading at HUF 315, a five-month high, the dollar was trading at HUF 282. As investors were seeking safe heavens across the globe, yields on all peripherial markets shot up. Yields on the Hungarian 10-year bond was back to 4% after closing at 3.83% on Friday, but came back down on news that the EU is open for further talks.
