Magyar Telekom Retreats to Record After MSCI Cut: Budapest Mover

Magyar Telekom Nyrt., Deutsche Telekom AG’s Hungarian unit, fell to a record after MSCI Inc. said it will remove the shares of from its emerging-markets index, while adding those of Gedeon Richter Nyrt.

The phone operator’s stock declined as much as 5.1 percent and closed 3.1 percent lower at 285 forint in Budapest, the weakest since listing in November 1997. More than 5.3 million stocks traded, almost 4 times the three-month daily average. Richter, Hungary’s largest maker of medicines, rose 3.5 percent. The BUX index gained 0.3 percent.

The MSCI adjustments will take effect from Nov. 26, according to a semi-annual review released yesterday by the New York-based index provider, whose gauges are tracked by investors managing about $7.5 trillion. Shares of Budapest-based Magyar Telekom, which has a 0.02 percent weighting in the MSCI Emerging Markets Index, decreased 24 percent this year. Richter’s stock is up 21 percent in the period.

Investors may sell as many as 17.3 million shares, or 1.65 percent of Magyar Telekom’s total outstanding stock, Budapest-based equity analysts at KBC Securities said in an e-mailed note. “Investors had been speculating on MSCI’s move for months,” Endre Kosa, a KBC analyst, said in a video posted on the company’s Facebook page today.

Magyar Telekom lost 0.7 percent yesterday after the operator reported a 37 percent drop in third-quarter profit to 9.3 billion forint ($42 million), missing the 12.2 billion-forint average estimate in a Bloomberg survey of seven analysts.

Lower Dividend

The company will offer guidance on dividends after posting full-year results, or upon closing a mobile frequency tender scheduled for this year, Chief Financial Officer Janos Szabo told reporters yesterday. Magyar Telekom’s shares have fallen this year amid speculation the company will reduce its cash dividend from the 50 forint it paid in the past three years.

“The market has been expecting a 20 forint dividend for the stock, but expectations now lean on the downside,” Budapest-based economists, including Akos Kuti, at Equilor Befektetesi Zrt., said in an e-mailed report today. “We find the share attractive, but wouldn’t rush with buying into it,” they said.

Equilor has a buy recommendation on the shares along with one other analyst, while 10 advise holding them and four say sell, according to data compiled by Bloomberg.

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