Hungarian assets rose in value after the landslide election win by the conservative Fidesz party led by Prime Minister Viktor Orban, who secured his third straight supermajority win on April. 8. Companies owned by Lorinc Mészáros, a friend of the prime minister who is seen as his proxy, surged on Monday in anticipation of more state procurement orders and acquisitions.  

As markets were expecting Fidesz to retain its power, a two-thirds majority will have a neutral impact on stocks and the forint, Equilor brokers said in a note on Monday. There is an underlying fear that Orban will use his supermajority to dismantle the remaining independent institutions, which would lead to wider conflicts with the EU in the long run, but the majority view of analysts was that the status quo would bring political stability, which would be favourable to markets.

Bond yields were little changed and the forint also gained against the euro slightly, but the move was in line with global trends, Takarekbank observed in a note. Now that the election is over, Hungarian assets could be outperformers as political risks are being priced out, they added.

Investors also regard the coordination between the government and the central bank as supportive in keeping public finances stable.

On Monday, the BUX index rose by 0.9% yesterday to 38,306 points. Stocks owned by Mészáros surged on Monday after Fidesz’s landslide election victory, forcing a halt in trading. Konzum, Opus and Appeninn shares rose by 15%, the daily maximum permitted.

Credit rating agency Fitch expects current economic policies to continue with Fidesz' election victory. Fitch expects 4% economic growth this year and a budget deficit below 3% of GDP. The government’s anti-EU and anti-migrant policies will remain, but will not affect EU funds under the current 2020 EU budget, Fitch argues.

The agency sees the state debt falling to 70% of GDP by the end of the year. However, the figure excludes the 2% impact of the liabilities of state-owned Eximbank, which according to Eurostat should be incorporated in the state debt figures.

The MNB would increase the base rate if inflation sustainably reaches the 3% target set by the central bank, but that is not on the horizon as annualised inflation in February was 1.9%, according to Fitch’s estimate.

A major challenge for the government is that the current economic growth cycle is near its end and capacity constraints will increase inflationary pressure, Capital Economics said in a note. There is a risk that monetary policy will remain "too loose for too long," it said.

An unequal fight 

The Organisation for Security and Cooperation in Europe (OSCE) said on April 9 that Hungary’s electoral process and the ruling parties’ excessive resources undermined contestants’ ability to compete on an equal basis in Sunday’s general election.

Voters had the option to choose from a number of candidates, but "intimidating and xenophobic rhetoric, media bias and opaque campaign financing" hindered real political debate, OSCE election monitor Douglas Wake told a press conference assessing the ballot.

Fidesz said in a statement that the OSCE had overstepped its authority with some of its findings.

“It’s not within the OSCE’s remit to express an opinion about the Hungarian election campaign, and wrangling with the ruling parties that oppose migration and voicing an opinion on the government’s campaign is especially uncalled for," Fidesz's Gergely Gulyás told MTI. "Opposing immigration is not xenophobia but rather a life instinct," he said.

European leaders congratulated Orban, with the first message coming from neighbouring Serbia’s President Aleksandar Vucic. Israeli Prime Minister Benjamin Netanyahu invited Orbán to visit Israel in the near future. 

However, the tone from fellow leaders was not altogether positive. German Chancellor Angela Merkel congratulated Orban in a letter, where she commented that, "It is quite obvious that there are also controversial issues in our cooperation, the different stances in migration policy come to mind.”

Jean Asselborn, the foreign minister of Luxembourg, hit a tougher tone. He said the EU would have to take "firm action" and remove the "malignancies" appearing in the EU common values. In an interview published by German daily Die Welt, Asselborn, a member of the European People’s Party, said Germany, France and all "non-disinterested" EU members would, under European agreements, need to “remove the tumour fast”.

Asselborn warned that the EU faces a decision of basic importance regarding Hungary: either the EU will allow Orbán’s type of logic to prevail or will stop this “unheard-of course of spreading false rumours and stand up for human values, the EU of community and peace”.

Confirming that clashes between Budapest and Brussels will continue in Orban’s new term, the Stop Soros package could be among the first bills passed by the new parliament, Fidesz caucus spokesman Janos Halasz said on Monday. The proposal would create difficult working conditions for NGOs that defend the rights of asylum-seekers and refugees. It would place a 25% tax on their foreign income, deny them access to border areas and require that their activities be licensed by the government. Hungarian-born billionaire and philanthropist Georgy Soros is the prime target of the Budapest government’s rhetoric. 

Opposition leader resigns

Meanwhile, Gabor Vona, head of the Jobbik party, has resigned and will leave parliamentary politics after the election. The leadership of Hungary’s largest opposition group accepted Vona’s resignation and will call a congress where he won’t run for re-election after serving 12 years at the helm, the politician said on his Facebook page on Monday. Vona also won’t take the parliamentary mandate he won as top contender on Jobbik’s national list. 

Ahead of the election, Jobbik made its bet on shifting to the centre of politics, leaving behind antisemitic and far-right rhetoric. However, the party won 25 seats in parliament with 20% of the party list votes, which is around the same as four years ago.