Can Xetra jump-start Budapest bourse?

Deals

The Budapest Stock Exchange is on schedule to introduce a new, widely used trading platform that it hopes will finally boost the meager interest for Hungarian stocks seen of late. The BSE is anxious to revamp itself and get the lifeblood pumping after the crisis left bourses in the region shaken.

“Traded volumes have basically been dropping in the past three years, not only in Budapest but also on regional and international markets,” BSE vice president Bálint Szécsényi said at the end of 2012. As a result the bourse saw an average HUF 10 billion in traded volumes for 2012, which in all respects amounts to spare change when looking at global volumes. The muted interest led to a 37% drop in turnover from 2011.

The management of the exchange has commenced a campaign that it hopes will finally be able to lead to some recovery and get money flowing again. As a major part of this effort, and following lengthy struggles and disputes, in early December the BSE is launching the Xetra trading system (a widely used platform that it is hoped will convince newcomers about the opportunities Hungary presents). Five of Hungary’s market-leading brokers initially opposed the system on concerns that it will erode the market. A resolution was finally announced last March.

“The biggest winners of the introduction of the new trading system include listed companies at the BSE which can be directly purchased by the nearly 4,500 brokers of the 250 European brokerage firms and banks. Their shares will be available to the investors of 18 European countries,” the Budapest bourse’s majority owner, the CEE Stock Exchange Group said in a statement.

Besides the new trading platform, the BSE is also introducing changes to the categorization system, which are likewise hoped to bring back liquidity that was lost over the past years, and attract new issuers that could significantly contribute to expanding the equity market.

Budapest could use new IPOs; one must search the memory rather thoroughly to name the last entrant, and even those that have ventured into public trading have been disappointingly few in number.

Szécsenyi explained in June that what was earlier the ‘A’ category is renamed to ‘premium’, while the ‘B’ category is rebranded ‘standard’. The BSE designed unique logos for both types of issuer that they hope will be widely used in corporate communication.

“Internationally, this is a common method, with which we want to acknowledge our issuers that commit to transparency and open competition,” Szécsenyi said.

Warming up for a rebound

If the statistics of the year so far are any indication, the Xetra launch in December could be the catalyst that brings the Budapest trading floor much closer to its former golden days. The BSE’s latest figures showed HUF 271.7 bln monthly turnover for July, a whopping 50.5% increase on the preceding month and the highest amount all year.

International and domestic factors all contributed. OTP boss Sándor Csányi sold off a large chunk of his portfolio, MOL chief Zsolt Hernádi anxiously waits to hear whether the Croatian authorities will issue a warrant for him, while Magyar Telekom has had to concede that the European Commission will not be able to scrap Hungary’s sectoral tax in court.

Exactly which direction the trades will go remains to be seen, but the issuers are probably somewhat concerned. Worries persist about the end of stimulus in the United States, the German elections not to mention the very tense situation in Syria, which could have dire consequences and fundamentally weaken overall confidence.

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