Although global market sentiment was favourable last month, the BUX index did not perform well in July. Local fund managers polled by Portfolio.hu are divided over the outlook on the Budapest Stock Exchange (BSE). Whereas they have turned more upbeat for the short term, their longer-term outlook has worsened somewhat. Pharma stocks remain at the pinnacle of the top picks list, while OTP is now less attractive due to the turmoil caused by government plans and the mass divestment of OTP shares by the bank’s chief.
Investors were largely at ease on global markets in July, as the Federal Reserve tried to calm market players that the stoppage of its asset purchase programme is entirely linked to economic fundamentals and there is no target date for closing the money tap, and the extremely low interest environment could remain even after that. The BUX, however, was unable to benefit from the favourable international developments, given that local investors were concerned about the (scarce) details and (large) uncertainties caused by the cabinet’s plan on a new relief package for FX debtors. The BUX index dropped 2.5% in July.
The majority of local fund managers (73%) polled by Portfolio.hu expect to see the index +/-5% compared to the 18,552 point reference value (end-July) three months from now. A month ago 20% of them projected a 5% plus rise in the index on this horizon, against 27% in our current survey.
The respondents turned more pessimistic in their 12-month outlook, though. In our previous poll 80% of them projected the BUX index to be up by more than 5% a year later, whereas now only 47% of them were of this view. Another 47% of them expect a +/-5% shift in the index and 7% believe a 5-15% decline is the most likely scenario.
The rising l-t pessimism among the fund managers is also reflected in the decline in the index comprising all 12-month forward estimates, while the indicator shows now change in the s-t sentiment.
Just like in the previous month, drug companies dominated the top picks, both garnering 9 mentions each after 7 last month. Egis has been ruling the top picks list for its appealing valuation and promising outlook, but since July it has tied with Richter.
The significant increase in Richter’s attractiveness may also be justified by the fact that -as in the case of Egis - the shares are cheap compared to its sector peers and the outlook is favourable. The company’s results may be given a serious boost by the launch of cariprazine and a pick-up in Esmya sales. Moreover, profits could benefit from expansion in Latin America and China. If the stock gains its way back into MSCI Hungary index, the share price may be fuelled some more, as institutional investors tracking the index could generate massive purchases.
OTP is now a lot less attractive among fund managers than a month ago - only three respondents named the banking stock as their top pick. This may have to do with the new relief package the government is drafting for foreign currency mortgage holders that could take a serious toll on financial institutions. Additionally, OTP Chairman-CEO Sándor Csányi sold almost his entire OTP package to put the proceeds into his agricultural business, a move market players responded to by fierce pressure on the sellers’ side.
The list of the least-favoured stocks features Magyar Telekom on top, just like last month. The telco is this unpopular for several reasons, including the raised telecom tax and the fact that the European Commission dropped its infringement case against Hungary’s special telecom levy, which means MTel cannot expect to get back the HUF 77 bn it had paid into state coffers.
Although last month only one fund manager mentioned CIG Pannónia among the least-favoured stocks, the company now garnered five votes in this category. Alternative energy company E-Star also had more mentions here than a month ago, as the Metropolitan Court rejected the petition for approval of settlement agreement and cancelation of bankruptcy process. This means the company may be liquidated.
Although the fund managers have turned gloomier in their long-term (12-m) views, this is not reflected in the weighting of local stocks compared to their own benchmark. Similarly to our previous poll, the ratio of underweighters remains 14%, whereas the ratio of overweighters is 21%.
As a result the ratio of net overweighters remained unchanged at 7%.
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