Hungary superbond devastates finance sector

The gross financial assets of households will likely reach HUF 60,000 bn by the end of the year, seeing as it stood at HUF 59,253 bn at the end of September. As households' debt rose to HUF 9,722 bn, net household assets at the end of Q3 were at HUF 49,532 bn.

Growth is also accelerating: the total amount of household savings rose 11.1% year on year, compared to 10.6% growth in 2018. As annual inflation remained below 3% in the meantime, growth in real terms has also picked up, from last year's 7.7% to 8.1%.

For the first time ever, households have more money in government securities, HUF 7,400 bn, than in bank deposits. This can clearly be attributed to the huge popularity of the Hungarian Government Security Plus (MÁP+) introduced this June.

The stock of current account deposits and cash also continued their slower but unbroken climb, securing second and third place among the various forms of savings. Investment notes, on the other hand, have been on the decline since the beginning of the year as, in addition to the squeeze-out effect of MÁP+, fund managers were hit by a regulatory change concerning property funds in May.

The figure below shows the stock of savings held in each type. The finance sector has apparently been unable to benefit from increased savings, except for commissions on government securities.

Aside form government securities, the stock of listed shares has also increased substantially in the past year, although nearly half of growth was not due to transactions but to re-evaluations (high stock market yields). Is it telling that the stock of current account deposits and cash grew fastest aside from government securities and shares, which indicates that households do not really know what to do with their liquidity in the current yield and sales environment.

Net transaction data tell us what types of savings households chose. Based on these figures, HUF 1,629 in new savings went to government securities in January-September, while the entire financial savings market grew HUF 2,205 bn based on transactions. In the first three quarters, 74% of new savings were converted to government securities, 15% went to bank accounts and 11% was kept as cash. All other forms of savings were net losers in this years changing landscape. In the third quarter, government securities attracted 89% of new savings.

Self-reliance products have seen dark days this year as life insurance savings grew just HUF 6.7 bn on a transaction basis, while pension funds gained HUF 1.5 bn, less than 0.1% of the funds flowing into government securities. At present, there is no change on the horizon that would buck this trend, aside from the MNB's proposed welfare funds that have yet to be implemented.

Cover photo: Artur Widak/NurPhoto via Getty Images