Hungary Stocks Soar to 9-Year High on Upgrade, Polish Risks

  • Benchmark BUX stock index at highest since August 2007
  • Hungary benefiting from Poland capital outflows, analysts say

Hungarian stocks rose to the highest level in more than nine years as the country’s return to investment-grade credit rating helped it benefit from outflows triggered by increased political risks in Poland.

The benchmark BUX index in Budapest has soared 33 percent in the past year to trade at its highest level since July 2007, outperforming Poland and the Czech Republic as well as the MSCI emerging-market gauge, which advanced 5.3 percent over the period. Hungary’s upgrades this year to investment category by Fitch Ratings and S&P Global Ratings, coupled with withdrawals from Polish and Turkish assets on political woes, have been driving the rally, said analysts at Budapest-based brokerages Equilor Zrt. and Concorde Zrt.

"Hungarian stocks have been outperforming their regional peers, the BUX has been able to increase or at least stagnate even when global sentiment has been negative," Equilor analyst Zoltan Varga said by phone, adding that the index may reach fresh highs in the coming weeks.

Hungary shed its junk rating at two agencies after five years as its debt burden eased and growth recovered, benefiting the biggest listed companies such as OTP Bank Nyrt. and refiner Mol Nyrt.

Local stocks have also profited as near-zero borrowing costs in developed markets sent investors toward higher yielding assets. That also makes any interest-rate increases by the U.S. Federal Reserve or the European Central Bank potentially cutting back its quantitative easing program downside risks for Hungarian equities, Equilor’s Varga said.

Mol shares rose 0.6 percent to 18,200 forint by the close in Budapest, the highest level since February 2013. The stock has extended gains since the company unveiled a strategy last week to diversify its business and increase payouts to shareholders in coming years, while oil prices have also been recovering.

Drugmaker Gains

Drugmaker Gedeon Richter Nyrt. rose 1 percent to a two-month high after announcing the acquisition of distribution rights for a drug.

The more-than 30 percent jump in the value of Hungarian equities over the past year contrasts with a 17 percent drop in Poland’s WIG20 stock index, a 5 percent loss in Prague’s PX gauge and a 3 percent decline in the Bucharest BET Index.

Hai Thanh Le Phuong, an analyst at Concorde, also highlighted the outflows from Poland, while adding some caution.

"Hungarian assets are not so cheap anymore," she said. "A potential further increase in the BUX depends mainly on global developments, like the outcome of upcoming elections in the U.S."

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