Management of the Budapest Stock Exchange (BSE) have announced on Wednesday its new strategy, which is aimed at making the Hungarian capital market bubbling again. The stakes are high. BSE Chairman Márton Nagy had previously labelled the endeavours as the last great stock exchange development. The details were shared with the public at a press conference today.
What companies may land on the BSE?
The Budapest Stock Exchange (BSE) will try to woo any company that has previously approached the bourse. BSE Chairman Márton Nagy (who is also Deputy Governor of the MNB) set the goal for CEO Richárd Végh that the stock exchange management should pay a visit to at least two companies a week.
There will be incentives
They are already working on what incentives the stock exchange will provide both for issuers and investors (e.g. tax benefits), including incentives aimed at boosting liquidity (support for trading companies active on the market), but there are no specifics yet.
- At least five listings a year (stock and bond);
- Have at least 50 companies in the ‘BSE Anteroom’
- Raise the number of high-liquidity stocks to five;
- Have 30 companies on the SME market;
- Stock exchange capitalisation / GDP to reach 30%;
- Have 30 stocks on the BSE that are covered and analysed by analysts;
- 10 IPO partners
Hungarian stocks to Hungarian institutions
In European comparison, the stock exposure of local institutional investors is low. The BSE would promote boosting their exposure, said Végh, without mentioning specifics.
Economic growth may be spurred too
If the capitalisation of the stock market reaches 30% of GDP (vs. 13% currently), it could add 0.2-0.3 percentage point to real GDP growth in the long term.
This is why the development of the BSE is necessary
2019-2020 will be critical years for Hungary due to the decline in EU funds (Hungary plans to absorb and disburse all available EU funds by then), due to which resources for corporate funding will also decrease therefore the BSE needs to be beefed up by 2020, Nagy said. The stock exchange is actively involved in consultations with the National Development Ministry and the National Economy Ministry to finalise the tools to develop the BSE.
Key elements of a five-year strategy
- Fine tuning and safety enhancement of listing and issuance procedures, provision of discounts related to stock exchange presence.
- Encouraging Hungarian investors to boost the share of local stocks in their portfolio by reducing administrative and other burdens related to equity exposure.
- Encouraging increased market liquidity, supporting investment service providers’ market making and analysis activities.
IPO Partner Programme:
an umbrella for consultatns, commercial banks, investment service providers, etc. to prepare companies in the BSE Anteroom and ensure their successful listing. The government is currently analysing which state companies could be listed on the BSE.
Creating a new market for SMEs:
- Multilateral Trading Facility (MTF) for companies that are ready for public listing, but their current level of development does not yet allow them to meet the standards required to enter the regulated market.
- A Private Placement Platform (PPP) for companies that would not go public just yet, but they are looking for capital investors with whom they may have individual transactions and that could possibly be directed towards public markets later on.
- A crowdfunding platform may be launched at a later stage of the strategy under a brand name separated from the other BSE markets, with the aim of financing start-up businesses and projects by involving a larger number of investors with smaller-sized investments.
- It is advisable to supporting new companies to go public on the BSE by using both EU and state funding, which could be crucial in endeavours to improve the capital structure of SMEs.
- improve the reputation of issuers on the stock exchange
- tightening the BSE’s system of monitoring and sanctions in order to enhance the safety of minority shareholders
Improving financial culture:
- wide-ranging educational programmes
- institutional road shows
- international and local capital market conferences
- active relationship with domestic and foreign investors
- intensive media presence
- rebranding of the BSE.
The Xetra trading system remains.
Published by Portfolio.hu on March 9, 2016.