Equity
Hungary c.bank has big plans for Budapest Stock Exchange - Dep.Gov.
Speaking about the Budapest Stock Exchange (BSE) in his presentation Nagy said the stock exchange is linked through various channels to lending, as it is an alternative source of funding for businesses. He said:
- The MNB has an interest in developing and reviving the BSE, for which it needs incentives. “If the MNB takes over the stock exchange" it will need to understand what it wants to do with it.
- By year-end, the central bank will publish a major key issues paper about its intentions with the stock exchange.
- Whereas stock exchanges get to play an important role in funding the economy, the BSE failed to fulfil this role, unlike its peers in Warsaw or the dynamically growing Bucharest bourse. In this area we could learn from the Polish, while in other areas they could learn from us.
- The market capitalisation of companies listed on the BSE (based on 2012 data) is below 20% of GDP, whereas it is close to 120% in the United Kingdom and the USA.
- It is unclear whether the Anglo-Saxon model would be better than the continental model based on bank financing. Both had their disturbances over the last few years and decades. The two are complimentary to each other and a healthy ratio would bring about a well-diversified funding for businesses.
- National stock exchanges have undergone considerable consolidation over the last few years, but the CEE Stock Exchange Group (CEESEG), the largest stock exchange group in Central and Eastern Europe, consisting of the four stock exchanges of Budapest (Hungary), Ljubljana (Slovenia), Prague (Czech Republic), and Vienna (Austria) only ranks 10th among European bourses (the first three being the London Stock Exchange, Euronext and Deutsche Börse), and it cannot be considered as successful, although the strategy of the Austrian owner was clear and correct.
- Turnover in Vienna, Prague and Budapest declined significantly between 2010 and 2014, not to mention that, contrary to its peers, the BSE cannot be proud of the number of listed companies, either.
- There are two large groups that could expand the number of listed companies on the BSE: 1. state-owned firms (their have a strong presence on European stock exchanges and in a lot of cases they operate as if they were private companies. One of them is Poland’s PKO Bank that is 72% owned by the state), 2. SMEs, for which the best direction to go would be the establishment of a separate section.
- Public utility companies, state-owned banks - possibly MKB and Budapest Bank - could be among the state-owned companies to go public, but the central bank also intends to expand the group of privately owned firms on the bourse. An important source could be suppliers, for instance.
- Besides the aforementioned supply side, the central bank would also expand the group of issuers, via incentives. Whereas the group of investors shrank when private pension funds were eliminated, but voluntary private pension funds and welfare funds could become stronger as investors and there are ways to give a boost to retail government security purchases too.
- The promotion of going public may be helped by increasing marketing and communication spending and brand building. To this end the MNB intends to support going on international roadshows, enhancing the role of Budapest as a regional financial hub, as well as organising investor conferences and workshops.
- Supervisory and regulatory measures aimed at strengthening the sector of brokerage companies are to be completed within a few weeks.
- "The stock exchange may have never had such a strong owner," Nagy prejudged the purchase of the BSE by the MNB. He expressed his hope that after many failed attempts the BSE will finally undergo its last major development.
