Hungarian Bourse Shakes Off Woes, Joins Bulls
The Budapest stock exchange's BUX index has risen more than 1,200 points, or 16 percent, since mid-October as foreigners have engaged in a steady if not spectacular buying spree, traders said.
The BUX index on Wednesday closed at 7,482.99, not far off its year high of 7,625.75 set in September and well above its year low of 5,130.26 logged in March.
Volume has remained steady at about 12 billion to 17 billion Hungarian forints per day, but traders said the mostly foreign buyers are snapping up all the relatively liquid Hungarian shares they can find.
"It's very optimistic now," said Robert Toth of K&H Securities, Budapest. "People are buying (pharmaceuticals) Richter, OTP Bank (OTPB), telecoms Matav and (chemicals) TVK," Toth said. "People are looking for the liquid shares with big capitalisation."
Several factors apparently have combined to fuel investors' confidence in the Hungarian market, which was severely shaken by the Russian economic crisis a year ago, causing the BUX index to plummet from a lifetime high above 9,000 to below 4,000 in a matter of weeks.
The Y2K computer bug, which is expected to cause some computers to fail on New Year's Eve because they will not roll over properly to the new century, was touted as a potentially big problem in Eastern Europe, but that fear is vanishing, at least as far as Hungary is concerned.
"People are beginning to realise that the world, and especially emerging markets, will not fall apart at the end of December," one analyst said.
HUNGARY SEEN HAVING WEATHERED MACROECONOMIC STORM
Another reason for the turnaround is a general perception that Hungary has weathered the worst of its macroeconomic worries and its economy appears to be on a steady upward trend. Hungarian Finance Minister Zsigmond Jarai recently forecast Hungarian gross domestic product growth of five percent next year. Most analysts agreed that a much more downbeat forecast by the Organisation for Economic Cooperation Development (OECD) of 3.5 percent GDP growth next year was off the mark.
"The OECD forecast was based on old data," one Western analyst said.
"Certainly Hungary has produced a number of good signs both on the macro level, and the third quarter earnings of companies suggests there is a recovery in corporate earnings growth," said Gyorgy Jaksity, managing director of Hungarian brokerage Concorde Securities, "so I think it's a good coincidence but I think still the driving element is optimism about the U.S. and global interest rates and global inflation and global liquidity".
"And then based on most of the research I think there's a consensus that people expect a strong increase in liquidity towards emerging markets equities as an asset and within that Hungary is one of the most favourite spots."
One reason is that Hungarian companies, with the bourse having failed to hold on to much in the way of gains this year, offer competitive if not bargain, price/earnings (P/E) ratios compared with other buys in their sectors.
Chemicals firm TVK, for example, has a P/E ratio of 10.80 for December of this year and 7.03 for end 2000, according to Reuters 3000 consensus estimates, while Western European chemicals like Germany's BASF AG or Solvay of Belgium have price/earnings ratio nearer to 20 for December.
In the telecoms sector, Hungary's Matav has a P/E of 20 for December, lower than either of its Central European peers Telekom Polska at 33.4 or Czech Republic's SPT Telecom at 26.3, according to the Reuters 3000 consensus estimates.
The BUX index on Wednesday closed at 7,482.99, not far off its year high of 7,625.75 set in September and well above its year low of 5,130.26 logged in March.
Volume has remained steady at about 12 billion to 17 billion Hungarian forints per day, but traders said the mostly foreign buyers are snapping up all the relatively liquid Hungarian shares they can find.
"It's very optimistic now," said Robert Toth of K&H Securities, Budapest. "People are buying (pharmaceuticals) Richter, OTP Bank (OTPB), telecoms Matav and (chemicals) TVK," Toth said. "People are looking for the liquid shares with big capitalisation."
Several factors apparently have combined to fuel investors' confidence in the Hungarian market, which was severely shaken by the Russian economic crisis a year ago, causing the BUX index to plummet from a lifetime high above 9,000 to below 4,000 in a matter of weeks.
The Y2K computer bug, which is expected to cause some computers to fail on New Year's Eve because they will not roll over properly to the new century, was touted as a potentially big problem in Eastern Europe, but that fear is vanishing, at least as far as Hungary is concerned.
"People are beginning to realise that the world, and especially emerging markets, will not fall apart at the end of December," one analyst said.
HUNGARY SEEN HAVING WEATHERED MACROECONOMIC STORM
Another reason for the turnaround is a general perception that Hungary has weathered the worst of its macroeconomic worries and its economy appears to be on a steady upward trend. Hungarian Finance Minister Zsigmond Jarai recently forecast Hungarian gross domestic product growth of five percent next year. Most analysts agreed that a much more downbeat forecast by the Organisation for Economic Cooperation Development (OECD) of 3.5 percent GDP growth next year was off the mark.
"The OECD forecast was based on old data," one Western analyst said.
"Certainly Hungary has produced a number of good signs both on the macro level, and the third quarter earnings of companies suggests there is a recovery in corporate earnings growth," said Gyorgy Jaksity, managing director of Hungarian brokerage Concorde Securities, "so I think it's a good coincidence but I think still the driving element is optimism about the U.S. and global interest rates and global inflation and global liquidity".
"And then based on most of the research I think there's a consensus that people expect a strong increase in liquidity towards emerging markets equities as an asset and within that Hungary is one of the most favourite spots."
One reason is that Hungarian companies, with the bourse having failed to hold on to much in the way of gains this year, offer competitive if not bargain, price/earnings (P/E) ratios compared with other buys in their sectors.
Chemicals firm TVK, for example, has a P/E ratio of 10.80 for December of this year and 7.03 for end 2000, according to Reuters 3000 consensus estimates, while Western European chemicals like Germany's BASF AG or Solvay of Belgium have price/earnings ratio nearer to 20 for December.
In the telecoms sector, Hungary's Matav has a P/E of 20 for December, lower than either of its Central European peers Telekom Polska at 33.4 or Czech Republic's SPT Telecom at 26.3, according to the Reuters 3000 consensus estimates.
