- The cabinet submitted to the parliament the second version of the 2002 state budget bill with a deficit of CZK 46.2bn. The bill will be discussed at an extraordinary session of the Lower Chamber this Friday. Deputies rejected the original budget draft with a deficit of CZK 52.2bn last month. The cabinet then managed to cut the planned budget gap owing to a downward revision of the CKA loss in 2001. Because the revision is based on a delayed transfer of the first portion of the bankrupt IPB bank's bad debts from CSOB to CKA, the sum by which CKA's loss is cut this year will blow up next year's loss of the agency. Without CKA's loss, the proposed budget gap amounts to CZK 10bn and meets therefore political agreements between the ruling CSSD and the opposition ODS. The re-worked version of the budget is likely to pass in the parliament despite the fact that 4K deputies unanimously oppose it.
- The government decided to sell 91.61 % of lorry maker Tatra Koprivnice to US firm SDC International for CZK 1.25bn, following a recommendation by privatization adviser Odien as well as by supervisory board of CKA. SDC International, which was established in 1994 for distribution and funding of industry and transport products produced in Central and East Europe, focuses on acquisition of companies in the region. In November 2000 SDC chose Terex Corporation as its strategic partner. Terex should contribute to Tatra's revitalization as well as distribution of the Tatra lorries in 60 countries. The production lines of Terex and Tatra are complementary. Tatra Koprivnice reported a gross profit of CZK 3.5m on revenues from the sale of own products and services at CZK 2.65bn in January to September 2001. The firm sold 1.6t lorries in 2000 and plans to produce 1.8t vehicles in 2001.
- The government is going to sell 59 % of state-owned shares in bitters producer Jan Becher - Karlovarska Becherovka (JBKB) in line with the original decision of September 1997 to the Salb company, controlled by Pernod Ricard. Before the decision, Salb rose its bid from CZK 1.324bn to CZK 1.377bn and Pernod Ricard resigned on its previous demand for the government guarantees concerning the unclear outcome of a trademark dispute of JBKB with Zdenek Hoffmann. Salb and Pernod Ricard also promised not to raise any claims in the future on the FNM and the Czech Republic related to the agreement on the protection of investments. JBKB posted a loss of CZK 120m in 2001H1, following a loss of CZK 23m in 2000H1. JBKB sales dropped 20 % in 2001H1 year-on-year.
- Deputy Transport and Communications Minister Marcela Guerlichova expects that the new majority owner of Cesky Telecom should be known in May 2002 (instead of the originally planned end of October 2001). The cabinet will discuss the postponement of the date in mid-November. The process was delayed due to Telecom's negotiations on the purchase of a 49% stake in mobile operator Eurotel. Guerlichova emphasized that it would be desirable that Telecom be bought jointly by an investor from the telecom sector and a wealthy financial partner. According to the press, Telecom is now trying to push the price for the 49 % stake in Eurotel from nearly USD 1.5bn agreed on in July down to roughly USD 1.1bn. The state wants to sell its 51% stake in Cesky Telecom together with the 27% stake held by the TelSource consortium of companies KPN and Swisscom.
- The Czech crown had opened at 33.46 and then fluctuated within a narrow range of 33.41 - 33.46 CZK/EUR in weak trading on Wednesday. Against the dollar, the crown had opened at 37.07 and then strengthened up to 36.92 during the morning hours. In the afternoon, though, better than expected macroeconomic data reported from the U.S. erased all gains the crown had accumulated in the course of the morning. CZK/ EUR was trading at 33.41/44 late on Wednesday, practically unchanged from 33.42/45 on Tuesday evening. CZK/USD closed at 37.12/14 on Wednesday, up from late Tuesday’s 37.26/28.
- Bond prices rose further on Wednesday propelled up by two purchase waves, one coming early in the morning (triggered by FOMC rate cut and its implications) and the other arriving shortly before the close. Falling yields appeared not only in the segment of government bonds, but also at corporate issues and MBS. The price of the state bond 6.55/11 rose 230bps and its yield dropped by 28bps. The longest state 6.95/16 benchmark jumped 195bps on Wednesday to 118.35/65, yielding 5.10/07 %. The state 6.75/05 bond rose 50bps compared to Tuesday’s close to 106.75/00, yielding 4.47/39 %.
| Late on November 7 | bond yield | Late on November 6 |
| CZK/EUR | 33.41/44 | - | 33.42/45 |
| CZK/USD | 37.12/14 | - | 37.26/28 |
| State 6.75/05 | 106.75/00 | 4.47/39 | 106.25/50 |
| State 6.95/16 | 118.35/65 | 5.10/07 | 116.40/70 |
(Martin Kupka)