The Hungarian bourse looks back at an eventful first half of 2012 with a new CEO, new products, and a decision on the replacement of its trading system. But can all these efforts stop the drastic fall in turnover?

Shareholders of the Budapest Stock Exchange (BSE) have finally approved the replacement of the MMTS I trading system with Xetra, as well as the introduction of a market making system. Xetra is expected to go live in the fall of 2013.

The new CEO of the BSE, Zsolt Katona - pictured above - believes that the new trading system will result in an increase in trading turnover. And the introduction of the market making system can bring stability, greater competitiveness, better execution of orders, and consequently stronger satisfaction among clients, which can also increase trading volumes, he stressed.

Katona replaced Gyorgy Mohai, who reportedly left the exchange over differences concerning the introduction of Xetra. While welcoming the new trading system, Katona stressed that the success of the CEESEG group, which includes the Budapest, Ljubljana, Prague and Vienna bourses, is founded on strong national stock exchanges.

The CEO, who had previously worked for the investment services unit of ING group and has filled several positions at the BSE, was appointed on May 15.

KBC Securities head of research Andras Somi told Voice, “We welcome every development at the bourse, but these efforts may not be enough to cure the main problem, namely the drastic fall in investor activity, which is reflected in plummeting turnover.” He believes that a serious improvement in the macroeconomic environment and predictable legal environment could give momentum to the capital market.

“Investors are not pondering over, for instance, the success of MOL’s exploration projects any more; instead they need to have an eye on special macroeconomic and political factors. As a result, many investors are staying away from the Hungarian market for the
time being,” he said.

Balint Szecsenyi, CEO of Equilor Investment and vice-chairman of the BSE said, “The most important issue today in Hungary is how the government could finance the budget deficit and boost economic growth. We believe that the government will sooner or later have to sell state-owned assets,” he added.

He cited Poland as the best regional example of a successful privatization through the stock exchange, adding that the Polish state remained a dominant shareholder in many of the privatized firms.

Szecsenyi named two potential privatization candidates, Hungarian Electricity Works MVM and Takarekbank.
He stressed that listings should be coupled with an increase in fresh capital.

Having listed on the BSE last November, Hungarian building materials company Masterplast raised HUF 719 million at a share auction on May 23. In an earlier auction in March, the company raised HUF 1.1 billion.

Masterplast will use the combined total of HUF 1.8 billion funds to build new production capacity and make acquisitions. “Masterplast is not a bad company, although it is small with a market capitalization of only about €30 million,” Somi said. Investors’ interest especially that of private investors, fell short of the company’s expectations.

However, among the small firms on the BSE, it could distinguish itself by its management’s efforts to ensure transparency. While Masterplast operates in the depressed construction sector, its niche market of insulation building materials promises growth due to reconstructions, Somi added.

Alternative telecom service provider Business Telecom (BTel) debuted 6,431,158 ordinary shares of a nominal value of HUF 100 each in the “B” category of the Equities Section of the BSE on May 24. BTel is already present on the bourse as an issuer of corporate bonds.

The company provides nation-wide wired voice, broadband internet, satellite television and other related services.

The BSE launched futures trading of foreign equities on May 15. The underlying products are the 10 most liquid foreign equities already listed on the BETa Market. Thus, investors can take leverage positions on a forint basis in
foreign equities listed on the BETa market.

The futures are available on BSE’s futures market and are identical to the equity based futures contracts being traded in the Derivatives Section in terms of expiration months, delivery method (physical delivery), settlement (by KELER), guarantee system (KELER KSZF ) and the currency of trading and settlement (HUF ), the BSE said.

The ten new products are BMW, BNP Paribas, Commerzbank, Daimler, Deutsche Bank, E.ON, Nokia, Thyssenkrupp, Total and Unicredit futures contracts.

Source: AmCham's Voice Magazin