Equity 5 July 2019, 10:20am

Hungarian fund managers have new top pick

Portfolio

Leaving its all-time high behind, the general index of the Budapest Stock Exchange (BSE) dropped sharply in May. Although it made several attempts to make up for the loss in June, these pursuits fizzled out and it closed the sixth month of the year slightly lower than its end-May standing. It Portfolio’s latest survey, some of the local fund managers think the BUX index could be significantly higher a year from now. The fund managers’ top pick is now OTP.

The contributors to our poll were the following fund management comapnies: Allianz, CIB Fund Management, Dialóg, Diófa, Erste Fund Management, Equilor, Generali, Hold Fund Management, MKB Fund Management, OTP Fund Management, Raiffeisen Fund Management.

April’s new all-time high was followed by a negative correction on the BSE in May. The BUX index jumped at the end of May then it turned down again in early June, as concerns about the USA-China trade conflict cast a shadow on sentiment on global stock markets. The Hungarian bourse made yet another attempt at edging higher in mid-June, but as one effort after another fizzled out, the BUX index closed the month slightly lower than in May.

73% of all respondents project that three months from now the BUX index will be +/-5% relative to the reference value, whereas 27% of them believe a 5-15% rise in the index is possible on this horizon. As for the longer term (12 months forward), 55% of all respondents see the BUX index +/-5% from the reference value, while 36% of them believe the general index will be up by 5-15% a year from now. Some of the local fund managers are not so upbeat, though; 9% of them expect to see the BUX index 5-15% lower by then.

The index comprising all estimates for three months forward shows a decline in pessimism, as 73% of all respondents expect to find the BUX index to be +/-5% from the reference value three months from now, whereas 27% of them expect a 5-15% rise in the index in the short term. No larger decline is expected on this horizon. The index comprising all 12-month forecasts also indicates less bearish views, with 55% of all respondents projecting a +/-5% change in the index, and 36% forecasting a 5-15% gain. The remaining 9% believe the index will be 5-15% lower a year from now.

As regards the blue chips, no fewer than seven fund managers named OTP as their top pick, which likely has to do with the sharp decline in the banking paper’s price in June, which the fund managers probably considered as an opportune time to buy. This assumption is underpinned by the fact that OTP’s share price bounced back in the first half of this week. Magyar Telekom and Richter garnered three mentions each as top picks, while Mol had two.

Waberer’s was named by three fund managers as a top pick, which could be relating to a nearly 57% decline in the company’s share price by mid-June, and a convincing rebound that has followed. Although the share price of Waberer’s started to edge lower after the upward correction, some of the local fund managers likely still believe a positive turnaround is possible. Alteo, ANY Biztonsági Nyomda and Graphisoft Park shares garnered two mentions each as top picks.

Three of the fund managers in our survey highlighted Mol as their least-favoured stock, while Richter was mentioned in this category by two of them. Among the blue chips, OTP and Magyar Telekom dodged this particular bullet, and garnered no mentions in the least-favoured category. Among the mid-caps, 4iG, Appeninn, and CIG Pannónia had two mentions each, and so did Opus and Waberer's.