Hungarian Markets Slip, but ING Keeps Bullish Outlook

Key Moments

Regional Risk-Off Hits Hungary Hardest

ING’s Frantisek Taborsky describes a broad risk-off environment across Central and Eastern Europe, driven by higher Oil prices and rising core yields that are pushing regional rates higher. Within this backdrop, Hungarian assets have come under particularly intense pressure, experiencing what he characterizes as the heaviest selling across the entire emerging markets universe over the past several days.

Taborsky attributes this sharp move to crowded long positions and an overall bullish stance toward Hungary that has prevailed since the April general elections. According to him, the latest downside move likely stems from investors taking profits and reducing risk in response to global uncertainty, rather than a fundamental deterioration in the Hungarian story.

Shifts in Rate-Cut Expectations Across CEE

Market expectations for monetary easing in Central and Eastern Europe have adjusted alongside the recent volatility. Taborsky notes that investors have slightly raised the implied probability of rate cuts by the Czech National Bank, with pricing now reflecting almost two cuts.

In Poland, by contrast, expectations for rate cuts this year have been reduced to around 20%. Hungary has also seen a recalibration: the anticipated easing cycle has been scaled back from 150bp just a few days ago to 120bp.

EUR/HUF Dynamics and Valuation View

Despite the recent sell-off, Taborsky maintains a constructive stance on Hungarian markets. He states that there is still value at the front end of the curve, scope for further steepening, and ongoing appeal in the currency. In his view, the recent correction has been excessive.

He points out that EUR/HUF has stabilized above 361, marking its highest level since mid-May and approaching levels seen after the general elections. Even after this move, Taborsky continues to see 350-360 as the most likely trading range for EUR/HUF for the remainder of the year.

Core Thesis on Hungarian Assets Remains Unchanged

Taborsky emphasizes that, in his assessment, the underlying investment case for Hungary remains largely intact despite the recent turbulence. He argues that both Hungarian interest rates and the forint continue to offer attractive opportunities, particularly in light of the renewed selling pressure and what he describes as improved entry levels.

“Hungarian assets are facing the heaviest selling pressure within the whole EM space over the last several days, which we attribute to crowded long positioning and a broadly bullish market view since the April general elections. Yesterday’s move likely reflected some profit-taking and risk reduction amid global uncertainty.”

“Markets slightly increased the implied probability of Czech National Bank rate cuts, now pricing almost two hikes. In Poland, rate cut expectations for this year fell to around 20%, while in Hungary the expected easing cycle has been scaled back from 150bp a few days ago to 120bp.”

“We continue to see value at the front end of the curve, further steepening and the currency, while the recent sell-off appears to have been overdone. EUR/HUF stabilised above 361, its highest level since mid-May and close to post-election levels. We still see 350-360 as the most likely EUR/HUF range for the rest of the year.”

“However, we do not think the underlying story has changed much: both rates and FX remain attractive, particularly after the sell-off and improved entry levels.”