Let's Not Convert Our Forint Holdings Into Euros Just Yet!

The majority see the HUF hovering in a tight range and project moderate fluctuations from current levels also on a 12-month horizon, but in respect of the longer-term outlook uncertainties were indeed bigger and the spread of forecasts was also wider. The number of those expecting bond yields to contract in the next three months grew from a month ago, but the ratio of those who are overweight on HGBs compared to their own benchmark has decreased.

The contributors to Portfolio.hu's monthly poll were: Adelphi Capital, AXA, Aegon, Berenberg, Buda-Cash, Budapest Fund Management, Citadella Consulting, Concorde, Credit Suisse, Dialóg, Equilor, Erste, Generali, ING, K&H, MKB, OTP, QUAESTOR and Raiffeisen.

Hungary's forint firmed to below 230 versus the euro in July and an increasing number of market players started to deem the HUF overvalued and heralded a correction. They believe factors inducing HUF appreciation can sizzle out. But there are those who expect the HUF to remain strong in the months to come, as the central bank (NBH) does need a strong national currency to curb inflation. 


The professional investors polled by Portfolio.hu do not forecast major shifts in EUR/HUF in over the next three months. The majority still see sideway moves in a 2% range, while the ratio of those projecting further HUF firming has grown since the July poll.

Meanwhile the picture gained from the prognoses of the 19 fund managers in the survey turned out to be less unequivocal. What we can see for sure is that the ratio of those projecting only a minor shift in the exchange rate has turned out to be the highest this month and the ratio of those expecting a larger than 2% HUF appreciation fell from a month ago. 

In case of the MAX index, the majority of the fund managers still project further rise to come in the next three months, even after a 3.7% ascend in July. The ratio of those expecting a rise of the index to be larger than 2% has grown, albeit only moderately. This change, however, is not so surprising, give that the latest chart pack of the Hungarian central bank (NBH) also confirmed that rate hike expectations vanished from the market in July. Moreover, the 3-m forward rate agreements (FRAs) also price in a 25-bp rate cut.

The market, however, do not expect an aggressive monetary easing cycle to be launched, with fund managers forecasting a 8.00% base rate also a year from now, only 50 bps below the current level. Accordingly, responses shifted towards a smaller rise in the MAX index, while previously it was the ratio of those who projected a larger increase that was bigger. We need to underline, though, that the majority still see a 5-10% rise in the index (a drop in yields) over the 12 months ahead. 

An increasing ratio of the fund managers have been ‘overweight' on HGBs compared to their own benchmark since April, but the August poll shows a break in this trend, with the majority being ‘market weight' and only 13% of the respondents ‘underweight'. 

Source: Portfolio Online Financial Journal