“The fundamental economic role of the Budapest Stock Exchange is to provide the domestic enterprises with an opportunity to raise capital. In recent years the domestic capital market has fulfilled this role as a member of CEESEG, the regional stock exchange alliance, to a lesser and lesser degree. At present the demand side of the stock exchange is dominated by non-resident institutions. The number of new issuances and turnover have fallen to such a degree that today the capital market no longer fulfils its role, thus intervention by the state became unavoidable, in accordance with the international trends.”
– National Bank of Hungary
The Hungarian National Bank (MNB) under the leadership of governor György Matolcsy, has purchased a 68.7 percent stake in Budapest Stock Exchange (BÉT), raising its total stake to over 75 percent. MNB reportedly paid HUF 13.2 billion (USD 45 million), or HUF 3550 (USD 12), per share.
The transaction is pending approval from the Hungarian Competition Authority (GVH), which the parties expect to receive in December.
The move appears to be a response to falling trade volumes and dwindling investment in Hungarian companies traded on the BÉT. Few Hungarian companies choose to go public. Hungarian consumers themselves hardly invest in stocks, and foreign investors have been liquidating their shares in Hungarian companies.
MNB deputy governor Márton Nagy says that, in addition to supporting the exchange, the government intends to take a number of state-owned enterprises public. He says MNB ownership of the exchange will make it easier for companies to go public and circulate their shares.
As Hungary’s state-owned companies tend to be loss making, it is not clear which “enterprises” Nagy has in mind.
He also says the government will be a strategic ally of the BÉT because companies trading on it “need all the support they can get”. While not disclosing the particulars about the extent of the government’s support, there has been talk of incentivizing investment by offering tax benefits to investors.
The MNB plans to roll out its new strategy for the BÉT sometime in early 2016.