All the main blue chips posted losses of over 2% on the day. Cesky Telecom even dropped 3.3% after the market discounted a potential Cabinet collapse and an eventual delay in the Cesky Telecom deal. However, after market close Spanish Telefonica was reported as a preferred bidder for the 51% stake with a bid of CZK 502 per share. This bid exceeds market estimates but is still subject to Cabinet approval. The Cabinet seems to have found support from KSCM, the Communist Party. The Communists say they will support the Social-Democratic led Cabinet in Friday‘s vote of non-confidence, however we feel that KSCM does not represent a predictable political force in the Czech politics. Moreover, their politics may be viewed by many as capital-market negative.
The Czech National Bank is holding a monetary policy meeting. The market expects a rate cut by 25bps to 2.00%.