Positive sentiment in BSE

The Budapest Stock Exchange index, BUX, moved marginally up last week on high volume as there was continuous heavy trading at Hungarian oil company Mol. The BUX closed on Monday 16th of July at 30,005 points, which is a record high closing for the index.
Mol continues to climb back slowly, and closed on Monday at Ft29,700 ($166.64). OTP Bank NyRt had its highest closing price to date on Monday at Ft10,850 ($60.85), while Hungary's largest pharmaceutical company Richter Gedeon NyRt continued making marginal gains to close at Ft38,005 ($212.25) on Monday.
Last month, Austrian oil company OMV AG raised its stake in Budapest-based Mol to 18.6% from 10% and said it wanted talks on "cooperation."
Hungary's government labeled it as a hostile bid and is seeking to protect Mol's independence by saying it might draft legislation that would allow it to block a possible takeover by the oil company's Austrian rival.
The Economic Minister, János Kóka, also confirmed in an interview that the government would not back a merger, but would support MOL to become a "regional multinational" company.
The minister said any stronger cooperation would be possible only if the Austrian government sells its 31.5% stake in OMV.
Mol, Hungary's biggest company, has officially rejected any approach from its Austrian peer, calling it "unsolicited and unwelcome."
Zsolt Hernándi, CEO of Mol, said that he saw no chance for a merger, adding that stronger cooperation would be more likely with those companies that have different assets, such as Lukoil (Russia's largest oil company) or Rosneft, also of Russia.
Mol's management believes that a combination with OMV would not be beneficial for Mol, shareholders or any other parties involved (see No benefit from OMV merger, MOL says, Daily Updates, The Budapest Sun Online, July 11). An OMV spokesman denied that the Austrian company had made a formal offer to acquire Mol.
Strategic
Mol also said it will continue with its strategic future acquisitions of Russian oil fields, and a potential increase in its ownership share in Croatian refinery INA (of which it currently holds 25%.)
The MOL board decided on Monday, July 16, to increase the dividend payout ratio to 40%, starting 2008, depending on investment opportunities.
This would mean roughly a dividend of Ft800-1,000 ($4.48-5.61) per share from next year, under normal external assumptions. The dividend was Ft508 ($2.85) per share last year.
Furthermore, the company has announced it intends to continue its share buyback program. The board of directors intends to request authorization to cancel treasury shares at the next annual general meeting.
Mol has already spent almost Ft300bn ($1.68bn) on its share-buyback program, in the past few weeks. The company lent 10% of its stock to state-owned bank MFB Rt, and 8% to OTP, whose Chairman, Sándor Csányi, is a Mol vice president. The transactions will help Mol buy back more of its stock, as the legal limit it can hold is 10%.
Analysts from Cashline Securities claimed in regards to Mol's issue that "fundamentally and from an operational point of view, we do not see a further upside in the share price; however the raise in the dividend pay-out ratio target and a further share buy-back are likely to keep the share price close to Ft30,000 in the very short-term.
"We also doubt whether the company really intends to cancel its treasury shares at the next AGM, as it would dilute its control and lift OMV's influence again (unless MOL keeps buying until it reaches 60%.)"
In my opinion, the positive sentiment currently prevailing in the BSE and other global markets will continue, at least in the short-term. In fact, the Dow index was close to reaching a record high 14,000 points on Monday.
This week will see more companies reporting their second-quarter corporate earnings in the US. If companies meet or slightly exceed market expectations (which have been lowered ahead of time), the share price will receive buying interest.
If the US market keeps performing the way it has so far, we can be almost certain that the BSE will continue making new historic record highs.