Hungary’s central bank officially announced on November 24 that it has bought a controlling stake in the Budapest Stock Exchange (BSE) from the Austrian operator of a network of regional bourses.
Under the deal, Magyar Nemzeti Bank (MNB) will acquire a 68.8% stake in the exchange, to take its holding to over 75%. While the market now hopes to see the bourse benefit from a series of state company listings in the Hungarian capital, the purchase also increases the clout of the central bank further.
Taken over by figures close to the Fidesz government in recent years, the MNB grabbed control of the country's financial markets watchdog last year. Meanwhile, it also controls a pair of banks - MKB and Budapest Bank - bought by the state late last year.
The MNB held a news conference to confirm the deal, which has been the subject of speculation in recent months. The central bank paid HUF13.2bn (€42.5mn) to buy CEESEG Aktiengesellschaft’s (CEESEG) 50.45% stake in BSE and an 18.35% stake from Oesterreichische Kontrollbank Aktiengesellschaft’s (OeKB), boosting its holding to 75.8%. The MNB said it paid HUF3,550 a share, and expects to close the transaction by the middle of December, pending competition clearance.
The central bank hopes the acquisition will help invigorate activity on the bourse, and pave the way for IPOs of state-owned companies. Turnover on the Hungarian exchange has been on a downwards spiral in recent years.
The purchase also appears to extend the MNB's efforts to source funding to drive the economy. It has been trying to push commercial banks to reinvigorate their activity, but lenders - mostly foreign owned - remain wary of policymaking after years of tough treatment. True to form, the central bank couldn't resist having a crack at the former Austrian operator of the BSE.
"The fundamental economic role of the BSE is to provide domestic enterprises with an opportunity to raise capital," the MNB said in a statement. "In recent years the domestic capital market has fulfilled this role as a member of CEESEG, the regional stock exchange alliance, to a lesser and lesser degree. The number of new issuances and turnover have fallen to such a degree that today the capital market no longer fulfils its role, thus intervention by the state became unavoidable, in accordance with the international trends."
Along with MNB’s measures aimed at stimulating banks to boost lending to businesses, companies' opportunities for financing should be also supported by the capital market, the central bank, insisted several times.
Under Governor Georgy Matolcsy - who as Prime Minister Viktor Orban's finance minister was the architect of Hungary's "unorthodox economic policy" that did so much to batter the banks - the central bank has advocated forcing lenders into increasing funding to an economy that is showing signs of a sharp slowdown. That has provoked complaints recently that Budapest is reneging on a peace deal with the banks.
The MNB will now implement a number of reforms to provide incentives to issuers and investors on the stock market, the central bank statement said. Meanwhile, Budapest has amassed quite a collection of assets it could float since Fidesz came to power in 2010. State energy holding MVM and MKB Bank have been mentioned as companies that could potentially come to market.
CEESEG, a holding company comprising the stock exchanges of Vienna, Budapest and Prague, and OeKB bought the stakes in BSE in 2004. The divestment, the first regional retreat for the company, is in line with CEESEG’s new strategy to focus on its activity as trading technology provider.
"The partnership between BSE and CEESEG through its Austrian subsidiary Vienna Stock Exchange is expected to continue, with the latter providing the trading system, interfaces, software and expertise," it said.