The Czech koruna strengthened on betterthan-
expected September’s current
account which showed a very low deficit
of CZK 6.3 bn. This favourable result is
based on the high trade balance surplus,
which was published previous week.
However, the balance of income, the deficit
of which fell for the second time in a row,
improved even more than the trade balance.
The balance of income deficit shrank to a
relatively acceptable CZK 11.6 bn in
September from a high of CZK 27.8 bn in
July. A relatively high surplus in the balance
of services also contributed to the good
overall current account result.
Nevertheless, we should view the latest
data as a whole cautiously because the accumulative current account is still
more than 6% of GDP. What is more, the
danger of high repatriations of profits by
foreign firms continues to threaten the
overall current account balance.
The koruna in reaction to the release shot up
to 31.40 EUR/CZK. Later on, the unit lost
some gains, but it closed the session again
at 31.40 EUR/CZK. PM Gross proposal to
sell state stake in Cesky Telecom (51 %
worth CZK 54.7 bn) on stock exchange was
supportive for the koruna too. The
government should start discussion on the
issue today.
Today another test of the 31.40 level is
likely. However, the market may lack
corporate flow due to tomorrow’s national
holiday. Thus the action of foreign banks
should be decisive. Eventual government
decision to sell Cesky Telecom on stock
market should push the koruna higher. The
development should be the same like in
neighboring Poland where IPO of the
biggest bank PKO caused significant zloty
strengthening.
ČSOB - Investment Research