INTERVIEW: Head of Budapest bourse clings to dream of CEE Euronext

By bne IntelliNews July 24, 2007

Robert Smyth in Budapest -

With Warsaw attempting to forge its own future as the powerhouse of Central and Eastern Europe's stock exchanges, Attila Szalay-Berzeviczy, chairman of the board at the Budapest Stock Exchange, is pursuing a policy of "united we stand" between CEE's bourses in a bid to create the region's very own version of Euronext.

Szalay-Berzeviczy says he believes in a CEE union of national exchanges that, "serve as individual pillars, with national exchanges run by a common trading system on which the members of the Budapest stock exchange can trade in Polish, Czech and Austrian shares, and vice versa."

Szalay-Berzeviczy believes no one CEE exchange is big enough to prevail over the others. "Therefore, competing with each other is silly - Vienna, Budapest, Prague and Warsaw can be interesting together," he says. "Romania can surely be part of this alliance as an EU member where the euro might be introduced sooner than in Hungary."

He views stock exchanges as strategic elements of a nation's economy and doesn't believe any would be willing to be taken over by an exchange that's controlled by the Polish government.

"Poland is taking, at first glance, a very aggressive position, but I don't see them being successful – the Warsaw Stock Exchange cannot deliver any value-added to other exchanges in the CEE because of its size," he says.

Szalay-Berzeviczy's vision of "individual pillars" is odd given that a consortium of Austrian companies, including the Vienna Stock Exchange, bought a 68.8% stake in the Budapest exchange in 2004 as part of plans to expand across the region. However, the largest shareholder in the consortium is Unicredit Bank Hungary, where Szalay-Berzeviczy is a managing director, which is in fact Italian and not Austrian.

"The question is not what nationality they are, but whether they are important players in the Hungarian market or not," he says, adding that his own bank is the leading custodian bank in Hungary and the third most active broker on the Budapest bourse. Its investment arm, Pioneer Fund Management is also one of the four largest on the market.

To list or not to list

While consolidation between the region's exchanges is the preoccupation of the media, Szalay-Berzeviczy says his focus is to get more big firms to list in order to replace the ones that are leaving.

"For the Budapest Stock Exchange, the biggest competition comes not from other stock exchanges but from delisting. Those companies that exited did so not because they didn't like being listed, they left because they were taken over by strategic investors," he says, referring to the likes of broadcaster Antenna Hungaria, chemical firm Borsodchem and food producer Globus.

The exchange is facing its biggest scare yet with the prospect that its biggest company, oil and gas group MOL, might be acquired by rival energy firm OMV from neighbouring Austria. "The outcome for battle of control of MOL will have a decisive effect on the stock exchange because HUF300bn [€1.2bn] in Hungarians' savings are invested in MOL."

Private companies he believes should be listed on the local exchange, but aren’t, include the real estate developer TriGranit, low cost airline Wizz Air and the transportation firm Waberer. State firms he urges the government to list include highway maintenance company Állami Autopalya Kezelo, the Hungarian Railways Cargo division, Hungarian Electricity Company MVM, the State Lottery Company, 25% of Budapest Airport and the Hungarian Post.

However, successive governments over the past 17 years have done little to increase the supply of firms on the local market during privatisations, opting instead to sell off companies to strategic investors. By contrast, he cites the successful listings of MOL and OTP Bank, where the government sold several tranches over a number of years, as examples of how best to privatise assets. "This way the value can be progressively increased rather than selling them in a single step to a strategic investor, but governments don't necessarily care about the long term."

An Olympian feat

This lack of such a vision is something that riles Szalay-Berzeviczy, who also serves as president of the Budapest Olympic Movement. "In order to be successful in surviving this period, Hungary has to have long-term goals that go beyond one parliamentary cycle. People want to see where this country is heading, there's a need for a project that's supported by most of the people," he says.

With a recent poll showing that 77% of Hungarians are in favour of a bid for the 2020 Olympics, Szalay-Berzeviczy reckons the games could benefit many aspects of the economy and impact on all levels of society. However, while many Hungarians are proud of Hungary's rich Olympic heritage, which has yielded 157 gold medals, many believe it's just too much of an economic risk to undertake right now with the economy hanging by a thread as fiscal reforms bite.

"Sceptics say let the country get in shape and then think about it, but that's an invitation to do nothing," moans Szalay-Berzeviczy, who argues that bringing the Olympics to Budapest is not a problem from a financial perspective. He calculates that to prepare for the Olympics in 2020, Hungary needs to invest each year HUF76bn (€309m). However, taking EU funding into account, that falls to €183m per year.

"In a country where GDP is [€102bn] and the central budget is [€36.6bn], this is manageable, especially in light of the benefits. For the Poles, winning the right to host the European Football Championships has brought things to the table that could never have been imagined," argues Szalay-Berzeviczy.

Budapest decided not to push for the 2016 Olympics because of a feasibility study prepared by PricewaterhouseCoopers (PwC), which declared that 2020 would be the earliest that Hungary could conceivably host an Olympics. According to PwC, Hungary would need to join the Eurozone by 2013, something which Szalay-Berzeviczy believes is achievable providing the government keeps to the convergence criteria even during the run-up to the 2010 elections. Hungary also needs stable 3-4% GDP growth per annum.

Szalay-Berzeviczy, whose great grandfather was founder and first president of the Hungarian Olympic Committee between 1895 and 1904, believes that, for once, the numbers could be on Hungary's side. Russia's Sochi winning the 2014 Winter Olympic Games works for Hungary in that it reduces the likelihood of a superpower like Russia being interested in 2020, he asserts. He also hopes that venues in the Americas and Asia will host the 2016 and 2018 games. "In that case 2020 will be a European Olympics where probably Rome, Paris, Prague and Budapest will race for the final victory."

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INTERVIEW: Head of Budapest bourse clings to dream of CEE Euronext

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