Equity 6 April 2010, 3:39pm

No correction likely in Hungarian stocks despite recent rally - Fund Managers

Portfolio

Although the general index of the Budapest Stock Exchange (BSE) rose to new highs in March, the fund managers polled by Portfolio.hu on a monthly basis do not expect a substantial downward correction on the market. The majority of the respondents project that the BUX index will be +/-5% from the 24,246-point benchmark three months from now. The agreement between the fund managers, however, is not so great when it comes to the 12-month outlook, with more of them forecasting a drop than a month ago. Nearly every local paper got more mentions as a top pick than in our early March poll, with Magyar Telekom and Egis taking the lead.

The contributors to the survey were the following: Aberdeen, Aegon, Allianz, AXA, Buda-Cash, Budapest Fund Management, CIB, Citadella Consulting, Concorde, Dialóg, Erste, Equilor, Generali, K&H, MKB, OTP, Pioneer, QUAESTOR, Raiffeisen.

Global stock markets rose further to 18-month highs in March and BUX did not miss the currents, either. The benchmark index went up 14% m/m, becoming one of the best-performing bourses of 2010. Despite the large momentum, the fund managers polled by Portfolio.hu do not seem pessimistic about the path ahead.

A sweeping majority of the respondents (74%) believe the BUX index will be +/-5% from the reference value three months from now, while 26% of them project a 5-15% drop from the 24,246-point end-March level. The most apparent change with regard to the short-term outlook is how drastically the camp of doomsayers shrunk.

With respect to the longer-term outlook, there is a bigger split among the fund managers, with 32% of them forecasting a 5% plus downward correction and a similar ratio expecting a 5% plus rise in the BUX index. The indicator comprising all the estimates shows increased pessimism among the respondents relative to a month ago.

As a result, the overall winner of the top picks competition has become Magyar Telekom, with a total of seven mentions. The decline in long bond yields and the approaching dividend payment have a lot to do with this outcome.

The rest garnered fewer mentions, but more than last month when fund managers named a surprisingly few Hungarian papers as top picks. In the mid-section of the ranking drugs maker Egis stands out. The company boasts strong fundamentals and is attractive in valuation terms compared to its big sister, Richter. MTel shares the top of the pedestal with Egis this month.

Interest in the small caps, though seems to be picking up, with Danubius and PannErgy collecting two more mentions than a month ago.

MOL remained on top of the least favoured stocks’ list, with an impressive eight mentions. Following a recent sharp increase in OTP’s share price, the bank paper garnered three more votes in this category than a month ago.

53% of the respondents are in market weight position with Hungarian stocks relative to their own benchmark, with 24-24% in underweight and overweight. The former camp decreased slightly from a month ago.