Fund managers more cautious on Hungarian stocks - Egis is the star

The contributors to our survey were the following: Aberdeen, Aegon, Allianz, Buda-Cash, Budapest Fund Management, Concorde, Dialóg, Diófa Fund Management, Equilor, Erste, Generali, ING, K&H, MKB, Plotinus, Quaestor, Raiffeisen.

More cautious

The benchmark index of the BSE has been virtually motionless over the past few weeks. While global macroeconomic estimates deteriorated even further even these were unable to ruin it for the stock markets. The reason was that a lot of investors were convinced by the bad macro data that central bank intervention will follow. A disappointment in this respect was how August started.

Several local fund managers have turned more cautious compared to early July in their short-term expectations about the BUX index. While a month ago 60% of the respondents projected the index to be up by more than 5% compared to the reference value three months later, now only 18% of the fund managers are of this view. A sweeping majority of the respondents expect the BUX index to be +/-5% away from the 17,408-point reference value three months from now.

Their longer-term (12-month) outlook has also been tuned down, although the majority continue to project a 5% plus rise in the index on this horizon.

Egis is the star

Egis remains the top pick on the Budapest bourse, as seven local fund managers named it as their top pick. The attraction of the drugs producer may root in its low valuation and high hopes in the Celltrion story, but the market also expects to see rather nice figures in the company’s Q2 earnings report that will be published next week.

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Looking back on the correlation between the actual share price of Egis and the fund managers’ trust in the paper, we can see that in most cases naming Egis a top pick proved to be a good call. A similarly high ratio of the fund managers liked Egis as much as now in late 2008 , after which the share price rose significantly. When Egis was deemed similarly attractive in 2010 the fund managers’ call brought good money for those who followed their instincts. This, of course, is no guarantee that the share price of Egis will take off this time too, but in view of how the stock performed in the past few weeks we cannot exclude that either.

No love for the small ones

This month no blue chip on the local market earned big love from fund mangers. They have garnered 3-4 mentions as top picks. MOL and OTP have both turned less attractive, while the more defensive stocks, Richter and Magyar Telekom, boosted their appeal. It seems that the restructuring currently in progress at MOL, another acquisition in Upstream, favourable news on the exploration block of the group’s Kurdish partner and the favourable refining environment failed to entice the appetite of the portfolio managers for the oil stock, while Richter’s appeal was enhanced by the company’s Q2 earnings report.

The fund managers do not seem to be overly interested in the small caps either. Pannergy received two mentions as top pick - perhaps as a reward for the services it will launch in Miskolc in the autumn -, but as for the rest there is nothing but shrugs. At this point, though we need to mention that CIG and E-Star are indeed on the mind of the fund managers, but these are currently among the least-favoured stocks. The respondents turned their back on E-Star for liquidity concerns and on CIG for yet another capital increase.

Being neutral

The majority of the fund managers keep local stocks at market weight compared to their own benchmark, while the ratio of underweighters and overweighters match. This also indicates that the fund managers are generally on a neutral view with respect to the outlook on the BSE.

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