Hungarian Stocks at Six-Year High as Moody's Weighs Upgrade

  • BUX index extends 12-month rally to 39% as OTP gains
  • Erste says large foreign investor buying `across the board'

Hungarian stocks rose to a six-year high as OTP Bank Nyrt., the nation’s largest bank, published better-than-expected profit and bets increased that rating companies may raise the country’s debt to investment grade for the first time since 2011.

The BUX gauge of 14 companies rose 1.5 percent by the close in Budapest, led by OTP and Mol Nyrt., Hungary’s largest oil company. Trading volume in the two stocks, which contribute to more than half the weighting in the benchmark index, was more than three times the three-month daily average. The BUX has rallied 39 percent in the past 12 months, making it the fourth-best performer among all major equity benchmarks tracked by Bloomberg worldwide.

Equities in the eastern European nation have outperformed emerging-market peers as Prime Minister Viktor Orban’s government reduced the highest bank tax in Europe, narrowed the budget shortfall and lowered government debt. Credit-default swaps imply the market is betting the central European nation will be lifted to an investment grade of Baa3. Sentiment was bolstered on Friday as OTP said its profit more than doubled in the fourth quarter and it doesn’t expect any negative extraordinary items to affect its earnings this year.

“At least one large foreign portfolio investor is buying Hungarian stocks across the board,” said Peter Varju, an equity trader at Erste Group Bank AG’s local brokerage unit. “Budapest has been outperforming peers for a while and OTP’s favorable earnings outlook has added to the momentum.”

Moody’s is scheduled to publish a review of Hungary’s credit rating, now at the highest junk grade of Ba1, late on Friday. Strategists at banks including Erste, JPMorgan Chase & Co. and Bank of America Corp. have predicted the country will return to investment grade this year. Moody’s will be followed by reports from Standard & Poor’s on March 18 and Fitch Ratings on May 20.

The Hungarian benchmark has gained 43 percent in dollar terms since 2014 compared with a 17 percent decline in the MSCI Emerging Markets Index.

OTP rose 2.7 percent to 6,360 forint, the highest close since April 2011. Oil producer Mol added 2.6 percent.

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