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Saturday, October 18, 2008

Hungary's Stocks Take a Pounding

Hungary's benchmark BUX stock index fell 2.4 percent on Friday following a 19.5 percent decline over the previous two days. The forint fell to an almost two-year low before recovering to trade at 267.06 per euro at 6:04 p.m. in Budapest, compared with 267.72 on Thursday.

The global financial crisis is hitting more vulnerable emerging markets as investors withdraw from riskier assets. The MSCI Emerging Markets Index plunged 28 percent this month and Russia's Micex Index fell 42 percent. Poland's benchmark WIG20 index fell 6.3 percent today.

Central European stocks droppedgenerally, led by banks, after Goldman Sachs Group Inc. lowered its economic forecasts for the region and Fitch Ratings cut Hungary's foreign- debt rating. Hungary's OTP declined 150 forint, or 4.6 percent, to 3,150, (its lowest level in 5 years) extending this month's loss to 48 percent. HSBC cut its recommendation on the shares to "underweight'' from "overweight'' and slashed its price projection for the bank 62 percent to 3,500 forint.

Komercni Banka AS, the third-largest Czech bank, fell the most since 1999. Bank Pekao SA, Poland's biggest bank, posted its steepest drop on record. The NTX Index of 30 companies in the region retreated 4.4 percent to 951.42, the lowest in almost four years, even as stocks in western Europe rose after a two-day selloff. The PX Index's drop was the biggest fluctuation among equity markets included in global benchmarks, while Poland's WIG20 Index lost 6.4 percent and Austria's ATX Index declined 3.3 percent.

All shares quoted on the Budapest Stock Exchange have now plunged when compared with both their 12-month and their historic highs. Compared to the 12-month highs of individual stocks Richter and Émásy have fallen the least, but even these are well down (38% and 40%, respectively). The drops have been among smaller entities like Synergon, Fotex and econet, but as we have said OTP is now not far behind

If we look at the MSCI Standard Core Index for Hungarian stocks, we find the index was down 1.4% on Friday, 44.96% so far this month, 59.63% in the last three months, and 61.24% so far this year.

Also, while I am here, I found this old chart on my excel sheet which is quite relevant at this time. It shows how net household saving as a source of potential finance has declined tremendously since the mid 1990's, and you can get some idea of the net external borrowing requirement from the shaded area under the main axis.

1 comment:

Kisvakond said...

Yes, Hungarian stocks took a pounding, but what if values just returned to a "normal" level?
Between 1997 and mid 2003, the BUX index did not change much, it mostly varied between 6000 and 8000. Then, from August 2003, a big increase started, with the BUX climbing from 8222 on 1 Aug 2003 to 30118 on 23 July 2007. The 2007 average value of the BUX actually exceeded 26000. Investing 8000 units in 2003 and reaping 26000 units 4 years later means an annual gain of 34%!
Investing 8000 units in 2003 and reaping 13000 units 5 years later is still an annual yield of 10%, which is not an excellent deal, but not too bad either.