MOL - OMV saga continues to dominate BSE talk
The Budapest Stock Exchange (BSE) index, the BUX, moved marginally down last week closing at 29,790 points on higher than average volume, as Hungarian oil and gas refiner MOl NyRt continues its buy-back program on its treasury shares. Mol, Hungary's largest company and owner of the nation's only refinery has already spent approximately Ft344bn ($1.9bn) buying back its shares to fight off a potential takeover from Austrian competitor OMV AG.
Mol closed a bit higher at the end of the week at Ft29,700 ($166). OTP Bank NyRt saw its highest closing price ever at Ft10,939 ($61) on Monday (July 23).
Dow Jones, the US financial publisher, also reported on Monday that MOL could be considering a merger with Poland's PKN Orlen, citing a report in Polish daily Gazeta Prawna, which quoted unnamed sources at MOL.
There have been some market rumors about a possible merger between MOL, with market value of almost $18bn and PKN Orlen, with market share of $9bn, in order to further avoid a possible takeover by OMV, although a spokesman for Budapest based-Mol rejected such reports.
According to Austrian national daily newspaper, Der Standard, Austria's economic minister, Martin Bartenstein, supports the idea of a merger between MOL and OMV.
He claimed that the EU would not block such a deal. Some market rumors claim OMV's CEO, Wolfgang Ruttenstorfer, is considering breaking off from his summer vacation due to the MOL-OMV issue.
The analysts of Cashline Securities believe that OMV has to take action very soon, if it is to strike, which could materialize in action at the EU court over the issue of MOL's buy back program. (MOL is allowed to hold only 10% of its shares. It currently has 2%, but has "loaned" almost 18% to OTP and the state-owned Hungarian Development Bank, or MFB Rt).
Cashline Securities maintain that MOL's share price will narrow to the Ft29,000-30,000 ($162-168) range in the short-term unless OMV makes a public offer.
Rate setting
On Monday (July 23), Hungary's central bank (MNB) kept its benchmark interest rate unchanged (and at the European Union's highest level), after inflation picked up on June.
The bank's policy makers, led by President András Simor, kept the rate at 7.75%.
Last month, the central bank cut its benchmark rate for the first time since 2005, as it expected inflation to slow down.
However, consumer price growth accelerated in June for the first time in three months, which could have been the reason for the delay in further rate reductions.
Unless there are clear signals of falling inflationary pressure, the MNB does not have enough room to ease key interest rates. The forint remains extraordinarily strong versus the dollar and euro.
The annual inflation rate rose to 8.6% in June from 8.5% the month before, the EU's second-highest rate.
The bank has a stated aim of cutting inflation to 3% within the next two years. But many central banks around the world have raised interest rates since the beginning of March, including those of US, the UK and the EU, making it harder for the MNB to cut rates.
Investors in Hungarian stocks should keep an eye on the second quarter earnings which will be published from next week until Aug 15. The first to report earnings will be Hungarian largest pharmaceutical company, Richter Gedeon NyRt, which is scheduled to announce its earnings on July 30 or 31.
In addition, global investors will continue paying attention to earnings in US companies. The results so far are quite mixed. To date, more than 129 companies in the US have reported quarterly results, with 60% of those beating Wall Street projections, according to Thomson First Call.
Investors will have plenty more earnings news to look forward to in the next weeks. If companies continue to support the positive sentiment in the US markets, the BSE will continue to touch record highs.