Czech Equity Daily: 09/02/10; CEZ, Macro

Index PX: 1,093 points (down 0.1% d/d); volume: CZK 2,007bn (USD 105m)

Market comment
Yesterday morning the PSE tried to correct previous slumps, with the PX Index strengthening over 1.5%, but then came selling and the index closed almost unchanged (-0.1% d/d, 1,093 points). Erste Bank declined the most; after climbing to CZK 689 in the morning it eventually followed other European banks, closing at CZK 655 (-2.7%). On the other hand, Komercni banka strengthened to CZK 3,571 (+2.0%). CEZ moved within CZK 875-860 (closing at CZK 867; +0.8% d/d). CME added 0.8% d/d to CZK 504/share thanks to a raised target price by Citi (USD 42). NWR lost 1.45% to CZK 170.5.

CEZ: Neutral (Analyst: Petr Novak)
According to the Energy Regulatory Office, electricity demand in December reached 5,382 GWh (-0.1% y/y). Gross demand increased to 6,492 GWh (+3.2% y/y). The y/y difference between the gross and net consumption is probably due to bigger grid losses, larger own consumption of power plants etc. (details were not provided yet). Net demand for electricity in 4Q09 dropped by 1.8% y/y. Total electricity demand in 2009 contracted by 5.6%. This year we expect improvement with the GDP growth (by 1.2%). The colder winter in 1Q10 and stronger industry (after a huge slump in 1Q09) should also have a positive impact. We consider the news neutral for today´s trading.

Trade balance – December (Analyst: Petr Novak)
Trade balance in December ended in a surplus of CZK 2.8bn (CZK -9.1bn December 2008) – first December surplus ever. In year-on-year comparison, the balance improved by CZK 11.9bn, thanks to the lowering of deficit in crude oil trade by CZK 4.0bn and an increased surplus in trade in cars and machinery by CZK 2.6bn. The results were influenced by global economy recovery (car exports increased by 36% y/y) in combination with lower imports due to weaker household consumption (imports of consumer goods dropped by 5.3% y/y) and subdued investment demand. Total exports grew by 4.8% y/y while imports dropped by 2.6%.
Last year, the CR posted a record surplus of CZK 153.2bn (CZK 67.3bn in 2008). Exports decreased by 14.1% y/y and imports by 18.1%. This year we expect a surplus of around CZK 130bn.

Unemployment – January (Analyst: Petr Novak)
Unemployment rate in January grew to its five-year high of 9.8% from 9.2% in December. The growth was driven by traditional seasonality (end of seasonal jobs and fixed-term contracts at the end of the year), which increased unemployment by 0.4-0.5%, and also by the state of economy, which added 0.1-0.2%; the result corresponds to figures for the previous 5-6 months. We expect the unemployment to peak at around 10% at the turn of 1Q and 2Q. For the whole year we expect an average rate of about 9.5%.

CPI – January
eAFT: 1.0% y/y; eMarket: 1.0%; Previous (December): 1.0%