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Two-thirds Fidesz win would be “best for markets”, says City

A two-thirds Fidesz majority as a result of Hungary's upcoming general elections, although not the most probable outcome, would be the "best for markets", London-based emerging markets analysts said on Wednesday.

In a comprehensive elections preview released to investors in London, complete with scenarios for potential results and their likely market reactions, JP Morgan said it attributes a 60% probability to a simple majority Fidesz win, attracting a “neutral to marginally positive” market reaction. This would reflect a decline in political uncertainty and a return to a majority government.

JP Morgan sees the odds for a two-thirds majority for Fidesz at 30%. The bank quoted a market survey indicating that this outcome would be seen as the best one for markets and the economy, largely because Fidesz would be able to push through local government reforms that would alleviate pressure on the budget.

The probability of Fidesz failing to win an outright majority is put at 10% by JP Morgan's City-based analysts, with a likely negative market reaction. Under this scenario, Fidesz would probably need to form a coalition with either Jobbik or the Socialists, even though "neither party is a natural partner for Fidesz". This scenario would potentially lead to a prolonged period of uncertainty being negative for Hungarian assets.

Beyond these scenarios, “we note that another marginally negative outcome would be one in which far-right Jobbik gains more votes than indicated by current opinion polls and emerges as the second largest party in parliament ... although their influence on policy would be limited, news headlines containing extreme rhetoric could unnerve markets”, JP Morgan said. (MTI-Econews)