Equity 25 April 2006, 1:24pm

Which Hungarian stocks would benefit most from gov't re-election?

Portfolio

Investors said two months ago what they say now: the outcome of elections (in this case a Socialist win) will have no substantial impact on the stock exchange. It is worth examining, however, how the confident win by the Socialist-Free Democrat coalition may affect the market. No one should expect dramatic change in the companies' lives, but there are certainly some interesting developments. The key question, however, remained Hungary's balance situation.

1 2 ›

Blue chips.

MOL

For MOL the left-wing victory is undoubtedly a good thing, given that its option on a 10% state-held MOL package will be open from May. Apparently, the company will face no hurdles to buy this stake, and the management can continue strengthening its position and also expand its manoeuvring room in case of a larger acquisition (or merger?).

Calling this option could have been jeopardised if the conservative Fidesz won at the elections this Sunday and the cushion gas dispute could have been reignited, as well, creating uncertainty in the minds of MOL investors.

OTP Bank

While we tried to avoid macroeconomic aspects when analysing the impact of the election outcome on companies, it is something we cannot do in case of OTP. We believe that the greatest beneficiary of the positive affects stemming fiscal consolidation could be OTP, given that it were exactly OTP's shares that were kept under pressure by foreign investors over macroeconomic woes.

Restoring the government's credibility would be most favourable for OTP in the short run, while its interest margin would certainly suffer if the euro was (forcefully) adopted in 2010 as planned.

Egis, Richter

The victory of the MSZP-SZDSZ coalition is mildly positive for drug producers, since a core element in the election campaign of opposition Fides was their would-be efforts “to stop the price increase of drugs". Nevertheless, the most acute problem remains the settling of the drug fund's deficit and the revamping of the subsidy system. The outcome in this sense as well is once again more favourable for the producers as talks between the cabinet and the producers can now continue without intermission.

In a best case scenario, talks, which professional organisations wanted to begin already before elections, can restart in the coming weeks. An agreement, however, will not be achieved until the new government is inaugurated.

Magyar Telekom

If MTelekom was not a blue chip, we would have left it out from this summary. The country's leading telecom group is virtually impervious to anything. Why would this be different with election results?