Equity 7 September 2020, 5:00pm

Another twist in Hungarian savings, households step on gas and brake at once

Portfolio

There's a split between Hungarian households in respect of what they consider a good investment to save up, the central bank's (MNB) latest government securities statistics showed on Monday. Demand for quoted stocks and investment funds remains unfazed, the need to accumulate reserves has not diminished, either.

Hungarian households apparently want to step on the accelerator and the brakes at once when it comes to savings. This is attested by the fact that

although a lot of them have been seeking entry points on stock exchanges, a part of their assets are still held in less risky bank deposits.

According to the central bank's latest government security statistics, Hungarians have maintained their interest in quoted stocks and net transactions in this category increased by HUF 14.5 billion in July 2020, which

has taken net demand this year to over huf 150 billion, three times as much as in the whole of 2019.

Net demand recorded by investment funds is also beginning to recover after faltering in the spring. Net inflow by households grew by another HUF 25 billion, although the funds are still in negative territory as for their performance this year.

Government securities were not popular in July. The reason could have been that there were major maturities and some of the proceeds did not get reinvested in government securities.

Less risky investments also gained traction in July, not only riskier ones. This also attests that Hungarian households are trying to simultaneously step on it and hit the brakes. Transactions with bank deposits jumped to HUF 156 billion in July from HUF 10 bn in June.

This is the largest demand we have seen since the spring when the outbreak of the coronavirus pandemic convinced a lot of households to swtich to less risky forms of savings. most of these investments are demand deposits, however, which means that accumulating reserves came to the foreground.

Owing also to the repayment moratorium households did not have to tap their savings, and the same applies for bank deposits, as well. This is how July turned out to be the second strongest month of the year after March that was all about accumulating emergency reserves for rainy days.

As we have pointed out recently, we have witnessed in the second half of the year not only a growth of assets held on current accounts, a sign of mounting caution, but also the return of the willingness to invest:

Still, the size of households' assets kept in government securities declined to HUF 8.4 trillion, while households held HUF 3,607 bn worth of assets in investment funds and HUF 667 bn in quoted stocks.

Corporate bond market buoyant

The corporate bond market has grown further, albeit at a slower rate, as the central bank's Bond Funding for Growth (BGS) keeps fuelling it. According to the latest MNB stats, the stock of securities issued by non-financial corporations exceeded HUF 1 trillion at the end of July, which marks a growth of over HUF 550 bn compared to the end of August 2019 when said corporations started to issue bonds (the BGS was launched on 1 July).