COBA CEE Strategy Weekly

Concerns about US growth, plunging stocks and rising credit spreads leave
more scope for risk reduction globally. However, we continue to observe
positive real-money investor sentiment in the CEE markets and keep our long
interest rate exposure. Market technicals are negative to the CEE FX in the
short run.

Hungary: Cash positions have surged. We expect a 25bp rate cut next week,
which could encourage the re-flow of cash into the short-end of the curve.
We keep marketweight in 3Y, expect the HUF range bound.
Poland: The fundamentals of the local market remain robust and the FX
volatility leaves the positive interest rate outlook unaffected. We expect
that the NBP could continue to cut in April. A large part of the FX longs
could have already been cut back, but we would not buy the zloty yet.
Czech Republic: The resolution of the government crisis removes domestic-,
but negative external influences keep upside risk on the CZK. Mid-term we
see the CZK oversold. Local rates remain safe.
Slovakia: the SKK under-performs the CEE FX in a non-liquid market. We hold
long position in mid-duration, we see the SKK oversold.