Credit Rating Raised

Hungary's credit rating outlook was raised to stable from negative by Fitch Ratings after the government's efforts to cut the European Union's widest budget deficit.
Prime Minister Ferenc Gyurcsány has cut public jobs, raised taxes and slashed subsidies to trim the shortfall after the EU threatened to cut aid.
The measures will help Hungary reach its deficit targets for the first time since 2001, according to the Fitch report.
The upgrade was due to the narrowing budget deficit and the anticipation that budget deficit targets for 2007 and 2008 will also be met. However, 2009 is less certain due to the 2010 elections.
The government wants to cut the budget deficit to 6.4% of gross domestic product (GDP) this year and 4.1% next, from last year's unwanted record high of 9.2%. This year's shortfall may actually be 6.3%, which will help reach the 2008 target, according to the Fitch report.
The austerity measures slowed economic growth to 1.2% in the second quarter, the second slowest in the European Union after Denmark. Fitch predicts Hungary's GDP will rise 2% this year and 2.5% next year, lagging behind neighbors such as Slovakia and Romania.
Investors are now awaiting third quarter earnings for Hungarian companies. The analysts at Cashline Securities have published a buy recommendation on OTP Bank as they believe that the third quarter earnings report (published on Nov 14) might not bring any negative surprises, and, in the current bullish market, no bad news means good news. In addition, the Russian and Ukranian subsidiaries of OTP might bring better numbers.
Sluggish
After two sluggish quarters, the net interest margin might increase, which would be quite positive for the bank. On the back of that, according to local press sources, OTP is pursuing negotiations with AXA (a world leader in financial protection and wealth management) to sell some stake of OTP's domestic insurance unit (Garancia). Furthermore, market rumors say that AXA could purchase up to a 10% stake in OTP as well. These plans seem rational, since the performance of OTP's insurance unit became less attractive lately, and OTP needs additional capital to make acquisitions in Russia.
In the meantime, AXA has 2% market share only in Hungary. AXA's 10% stake in OTP would strengthen the partnership and help protect the bank against a hostile takeover, although such an attempt is not thought likely.
In the view of Cashline, the news will stir up the trading waters around OTP. Considering that the analysts are expecting a relatively strong flash report, they are looking for a positive reaction, unless there is a downturn in the global markets. As the share price of OTP has been depressed for the past few months, they see it as a good entry point to buy at the current levels (Ft9,300-9,400) before the third quarter earnings can bring an upswing.
Mol, the largest oil and gas company, will also report on Nov 14. Our analysts estimate lower numbers in this quarter, and don't see a shiny earnings report. Mol will not be favored by increased oil prices due to a high tax proportion in Russia and declining production in Hungary.
The weak US currency has not helped either, as MOL is a US dollar earner. The relatively mild weather thus far has also decreased the demand for fuel.
Even though the report will not bring any kind of positive surprises Mol's trading is determined mainly by the take-over speculation from Austrian rival OMV.
The first company to publish earnings will be Magyar Telekom today (Thursday, Nov 8), a subsidiary of the German giant Deutsche Telekom.
The analysts at Cashline Securities have issued a buy recommendation on the telecommunications company as it has growing sales, costs under control and a favorable shift in working capital, enough to keep cash generation outstanding.
It also has solid earnings, despite an unfavorably strong Hungarian forint, which is detrimental for the company's bottom line .