On Thursday, the management of the Budapest Stock Exchange (BSE) presented the results to date of the second year of this strategy, announced in 2016, as well as its plans for 2018. The recently published “Strategic Report 2017”, which presents the results in detail, reveals that the BSE had an extremely busy year in 2017.
New issuers, new exchange products and services
Last year saw the bell of the Stock Exchange ring for UBM Holding, Masterplast, OPUS and last but not least, for Waberer’s on numerous occasions, and thanks to the latter's listing, the Exchange saw the largest IPO of its last 20 years realised. Waberer’s International achieved the sixth largest capitalisation on the trading floor. Moreover, the newly-listed company was also added to the stock basket with the fifth largest weight during the revision of the Budapest Share Index (BUX) in September 2017. The company spent almost all of the HUF 15.5 billion gross proceeds from its public offering on the acquisition of Link, one of its Polish competitors, which is considered to be the European leader in full truckload (FTL) transportation.
When presenting the results for 2017, Chairman-CEO Richárd Végh emphasised that
from the perspective of the BSE, one of the most spectacular results of 2017 is that the Hungarian capital market celebrated its largest IPO of the past two decades. Increasing IPOs is a frequently stated objective of the BSE, but at the same time, last year we also placed great emphasis on further developing the Exchange’s eco-system.
In addition to new IPOs, several debt securities, structured products and investment units were listed on the stock exchange in 2017. Our issuers contributed to the growth of the capital market by listing 10 new mortgage bonds, 15 new bonds, 18 new investment units and more than 130 certificates and, in addition, the BSE debt securities market also grew by additional issues with a total face value exceeding HUF 140 billion.
Medium-sized companies: Destination stock exchange!
It was at the BSE50 – Medium-sized Enterprises’ Summit, held on 20 September 2017, that the Budapest Stock Exchange officially announced the launch of the Xtend platform, with which the aim of the BSE is to expand the range of potential issuers and investors. Compared to the regulated market, the Exchange applies somewhat simpler conditions to issuers, and the enforcement of investor protection aspects are not just guaranteed by the authorities (as required by law) but also through the nominated advisor system. This means that with Xtend, the BSE is looking to open its doors to medium-sized company issuers and to investors looking to invest in medium-sized companies. The Exchange is expecting numerous SMEs to be admitted to the market in the coming years, which could thereby become large companies on the stock exchange by successfully complying with both investor expectations and strict transparency criteria.
The successful exchange presence of medium-size companies also requires that investors are provided regular and quality information not just about large corporations, but with regard to smaller businesses as well. To this end, in 2017 the BSE launched a programme aimed at improving the availability of information and supporting liquidity, as a part of which analyses of the shares of small and medium-cap companies are published on the BSE’s website, while investment service providers support order book liquidity through market-making. In addition to general market developing effects, this could also generate higher turnover and ramp up investor activity in small- and medium-cap shares, which could, in turn, motivate new issuers to enter the market.
The admission of SMEs to the Exchange in 2017 was also supported by the ELITE company development programme launched in cooperation with the London Stock Exchange. The BSE adds further modules to the training programme that is essentially centred in London, in order to provide Hungarian businesses with practical and up-to-date information on the Hungarian regulatory environment, Hungarian investor expectations and other country-specific topics. Currently, there are 10 Hungarian companies participating in the two-year training. The Budapest Stock Exchange expects the programme to assist participating medium-size companies to progress on a new growth path, for which they also utilise capital market tools.
At the same time, the second year of the implementation of comprehensive capital market and stock exchange development plans was mainly about building relationships: establishing new ones and deepening existing relations. This is also something that BSE Chairman-CEO Richárd Végh emphasised, saying: that
I consider the establishment of an active professional relationship between the BSE and IPO-ready medium-size businesses to be our greatest achievement in 2017.
Corporation with professional organisations
Last year again saw the BSE sign cooperation agreements with key industry organisations, with the Confederation of Hungarian Employers and Industrialists (MGYOSZ) and the Hungarian Chamber of Commerce and Industry (MKIK), in order to be able to address companies more efficiently. The agreement entered into with the Hungarians in the Market Club (MAPI) also serves the very same objective in the near future. One of the key points of the cooperation with MFB Invest is for the two organisations to work together in preparing state-owned and privately-owned companies for an initial public offering (IPO). However, facilitating the design, introduction and development of corporate governance frameworks is also an area where the two entities are looking to collaborate.
Largest international stock exchange conference comes to Budapest
An agile Hungarian stock exchange focusing on dynamic development cannot exist without building and strengthening its international relationships. As before, our aim is still to actively participate in global capital markets by reinforcing the regional position of Budapest and promoting the Hungarian stock exchange and capital market among international investors and financial intermediaries. For this reason the Exchange, hand-in-hand with issuers, organised joint roadshows and investor visits to London, Paris, Warsaw and Zagreb in 2017.
In 2017, the Bank of China and the Shanghai Gold Exchange joined our group of international partners, allowing Chinese investors to become familiar with the potential of Hungarian companies and also granting Hungarian investors access to products quoted in the Chinese currency.
Staying in international waters, in the spring of 2017 it was the turn of the Hungarian capital and of the Budapest Stock Exchange to host the World Exchange Congress, frequently called the general assembly of global stock exchanges, which was attended by 225 visitors from 64 countries. The two-day event – held with the participation global stock exchanges, clearing houses, and the leaders of service providers linked to these exchanges – dealt with current capital market trends, regional stock exchange cooperation and the innovations of next-generation exchanges. Participants included heads of institutions such as Nasdaq, Deutsche Börse, the Shanghai Stock Exchange and the Japan Exchange Group.
Supportive investment environment
Thanks to the permanently excellent performance of the Hungarian economy and the abundance of liquidity observed in 2017 in the money and capital markets, last year again saw the BUX index produce spectacular growth. The BUX grew by a total 137 percent from the beginning of 2015 until the end of 2017, which is an outstanding performance not only at the regional level, but also at the global level. The BUX was the best performing major European stock exchange index for the past two years (between 30/12/2015 and 29/12/2017) and produced the second largest growth worldwide.
Compared to 2016, the average daily trading volume on the Budapest Stock Exchange has grown by 17.5 percent to HUF 10.7 billion; whereas the HUF 2,690 billion annual trading volume achieved in 2017 exceeded the HUF 2,298 billion total annual trading volume recorded in 2016 by HUF 392.1 billion (+17 percent). Numerous exchange issuers underwent important changes in terms of the ownership structure, company management and strategy, developments which were accompanied by serious investor interest and which also resulted in an intense price increase. As a result, share market turnover and the concentration of capitalisation decreased.
In more happy news, the stock market portfolio of the Hungarian population continued to increase in 2017 and reached its highest value ever by the end of the year, exceeding HUF 500 billion. At the same time, the Stock Exchange still considered financial education to be one of its most important objectives. To this end, in harmony with the seven-year financial education strategy prepared under the coordination of the Ministry for National Economy, we are continuing our training programmes provided to Hungarian retail and corporate investors, as well as the BSE Academy, providing free of charge lectures, and the ELITE programme addressing businesses. As another huge step forward, in 2017 the BSE established its educational subsidiary, the Budapest Institute of Banking, which provides high quality, practice-oriented training to the professionals of the future.
The bell will keep on ringing in 2018: Market development does not come to a stop The 2018, the BSE will be continuing the building of the Hungarian capital market eco-system, which is a key component in bringing a permanent turnaround in competitiveness. The new services provided by the Exchange considerably improve the access of Hungarian-owned medium-size companies to capital, financing and the know-how essential for the use of the capital markets. In these areas, we will continue to cooperate with market players, with the government as well as industry organisations, since a smoothly operating and consistently strengthening Hungarian capital market, operating in a supportive business and regulatory environment, could greatly contribute to the well-balanced growth of the economy. The objective remains the same in 2018: acting as a catalyst, the BSE will continue to strive to increase stock exchange turnover and to raise the number and value of listed companies by 2020.