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Budapest bourse counts on foreign IPOs to lift turnover in 2007

The Budapest Stock Exchange (BÉT) is relying on foreign companies including Orco Property Group to join the market and boost trading as the bourse combats the effects of a slowdown in the Hungarian economy.

Orco, a real estate developer in central and eastern Europe, is expected to list in the first half of 2007, Árpád Pál, CEO of the bourse, said in an interview. Other possible listings include Canadian energy company Falcon Oil & Gas Ltd. and state lottery organizer Szerencsejáték Rt. Budapest lost more listings than it gained last year, and Hungary's central bank predicted a 20 to 25% drop in turnover this year as a result of government measures designed to reduce the budget deficit. The Warsaw Stock Exchange has said it expects about 60 debuts this year after 38 in 2006. „It will be huge if we can repeat last year's turnover,” Pál said at his office in the city, declining to give forecasts. The austerity measures „created more unfavorable conditions for both listed companies and investors.”

Prime Minister Ferenc Gyurcsány is raising taxes and cutting subsidies, leaving less money to go into the stock market. The government expects economic growth, the weakest in eastern Europe, to drop to 2.2% this year, the slowest in a decade. The economy grew 3.6% in the Q3 of last year from 3.8% in the previous period. The BÉT posted a profit of Ft 2.4 billion ($12 million) last year, stagnating from the year before, while revenue jumped 23% to Ft 3.2 billion. Its BUX Index rose 8.5% in the past year, compared with a gain of 17.5% for Poland's benchmark WIG20 Index and a 6.6% increase for the Czech PX Index. Six companies left the BÉT last year, with just three joining, said Pál, who took over as CEO at the bourse in October, replacing Zsolt Horváth. In addition to Orco, Falcon Oil & Gas, the Canadian energy company that found natural gas in Hungary, may list its shares in April, the newspaper Népszabadság reported last week, citing CEO Marc A. Bruner.

Budapest executives said late last year that three companies applied for listing subsidies from the Economy Ministry for 2007. „I see possibility of mid-sized companies rather than bigger ones and also in state companies,” Pál said. He cited state-owned gambling company Szerencsejáték as one possibility, „even if the government keeps its majority stake,” and „regional utilities which are majority owned by local governments.” To help counter the predicted loss in revenue, the exchange could grow by purchasing the country's clearing house, Keler Zrt., in which it owns a minority stake. A government decision last year, which ruled the state must remain majority owner of Keler, stalled the process. Pal said he expects that regulation to change this year this year, allowing the Budapest exchange to buy the state's stake. HVB Group owns 25.2% of the BÉT, while the Vienna Stock Exchange has 14% and Erste Bank AG owns 12.2%. Oesterreichische Kontrollbank has an 11% stake and Raiffeisen Zentralbank Oesterreich AG owns 6.4%. (Bloomberg)