Czech Equity Daily: 10/03/10; Macro

Index PX: 1,172 points (up 0.1% d/d); volume: CZK 1,199bn (USD 64m)

Market comment
After a positive opening, the PSE fell into the negative territory as investors took their profits. After that the activity stayed low and some recovery came only with the opening of overseas markets, when European markets as well as the PSE returned to growth. In the end, the PX Index closed up 0.1%, mainly driven by CEZ (+0.4%, CZK 891), which strengthened above CZK 890. After a selling wave in the morning, NWR closed at CZK 193.5 (d/d unchanged); in London it even grew to CZK 200. Nevertheless, European mining companies in general declined, joined by banks. This did not really apply to the PSE – Komercni banka lost about 0.1% (CZK 3,752) despite a strong seller and Erste Bank dropped by just 0.1 % (CZK 744). VIG recorded the largest gains, closing up 2.6% (CZK 960).

Inflation – February (Analyst: Petr Sklenar)
Inflation in February unexpectedly fell to 0.6% from 0.7% in January, while an increase to 0.8% had been expected. In month-on-month comparison, the price level remained unchanged (0.0% m/m). Food prices slightly increased (0.4% m/m) as a result of higher prices of vegetables and bakery products. On the other hand, car prices fell again (-2.8% m/m). Other price movements were only minor.

Industrial output – January (Analyst: Petr Sklenar)
Industrial output in January grew by 5.3% y/y, beating expectations (AFT: 1.0%; market: 4.0%). Seasonally adjusted production increased by 3.0% m/m. The recovery is driven mainly by exports – revenues from exports increased by 8.1%. New orders also improved (3.7%), especially those from abroad (6.8%). In year-on-year comparison the results are impacted by a record low base in January 2009. Therefore, car production surged by 51.1% and related production of rubber and plastics recorded an increase by 15.6%. The data confirm our view that industry will gradually stabilise and recover thanks to foreign demand.

Real wages – 4Q/2009 (Analyst: Petr Sklenar)
Real wages grew in 4Q by 4.8% y/y. An average monthly gross nominal wage reached CZK 25,752, which is 5.2% increase. The growth can be attributed to statistical and one-time factors. Layoffs continued, especially of workers with lower wages, which statistically improves the arithmetic mean. The volume of paid wages declined by 2.0% but unemployment fell by 6.8%. Both figures clearly reflect recession on the labour market. Another factor in the wages increase is a lower sickness rate due to tightened conditions and payment of extraordinary bonuses at the end of the year due to the raised cap for social insurance effective from January this year.
In 2009 the average wage grew by 3.0% in real terms (4.0% nominal growth), reaching CZK 23,598.

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