The Budapest Stock Exchange index, BUX, moved marginally last week with extremely high volume as continued heavy selling at Hungarian oil company MOL offset strong gains at OTP Bank. The BUX has closed on Monday the 2nd of July at 28,984. For the past week, the trading volume has accounted for at least double the daily average as we have seen USD 200 million or USD 300 million in daily turnover instead of the average USD 100 million.
After gaining almost 25% in three trading days (from Friday 22nd July until Tuesday 26 st July) MOL started to fall, losing approximately 8 percent since then as speculation of a bid by Austrian competitor OMV has been cooling off. We have been seeing heavy selling of the oil and gas refiner as there is speculation now that MOL will not be subject to a take-over from OMV at least for the short-term.
Hungary's government is drafting legislation that would allow it to block a possible takeover of oil and gas company Mol by its Austrian rival OMV. According to the Financial Times, Finance Minister Janos Veres said the Hungarian government is looking for ways to protect strategically industries such as MOL without violating European Union regulations. OMV already announced that they upped their stake to 18.6 percent from 10 percent. The Austrian oil firm said they bought additional shares of MOL in order to entice closer alliances between the two companies amid energy sector consolidation.
Elsewhere, OTP continued to outperform. Giant bank HSBC hiked its forecast on the Hungarian bank stock, giving the shares a new target price of 12,308 forints compared to 10,642 forints from its previous recommendation. HSBC said domestic political risk to the bank's growth targets had decreased. They also felt that the growth at its Russian subsidiary will be a key factor in delivering important future growth prospects. In addition, to these comments from HSBC’s analysts, Citigroup also mentioned OTP as one of their favorite picks within the CEEMEA areas.
Last week brought an unexpected rate decision from Hungary’s central bank: interest rates were cut by a quarter point to 7.75%. The decrease in interest rates was a surprise as the timing was a bit earlier but otherwise consistent with market expectations in terms of direction and measurement.
Hungary’s unexpected rate cut barely made the headlines given all the other excitement taking place with MOL’s story, which experienced record trading volumes as well as helped the Hungarian index (BUX) and OTP reach a record high last week.