Budapest Stock Exchange would be pleased to welcome domestic companies in the parquet. Why is it advisable for Hungarian executives to consider a listing?

There are countries in Europe, including Poland, the UK or the Scandinavian countries for instance, where companies intensively use capital markets, while stock exchange in the life of Hungarian companies has only a minor role. Let us see what the possible differences can be between Hungary and these countries. We have much in common: every country has a low interest rate environment, offering companies a less expensive access to bank financing. As they all are members of the European Union, they can also deploy investment funds. Poland, for example, is surely comparable to Hungary in this respect. However, when stock markets come into question, domestic companies are often inclined to postpone the issue, saying that it is not their utmost priority. What could be the reason for that? I cannot think of any other explanation than a difference in mindset. Yet, any leap forward in corporate development requires capital everywhere. If a company is willing to step out to the regional stage, its executives had better get familiar with the options of capital raise through a possible listing.

A listing on the stock exchange is particularly advisable for those willing to grow. Is that what you mean?

Exactly. Those who are already in the parquet know that a company can never rest on its laurels: for the purpose of continuously increasing shareholder value, the company has to keep on growing. Let us have a look at the number of Polish companies which have entered the Hungarian market in recent years, whether by acquisition or by way of organic growth, and compare it with the number of Hungarian companies which have opened for the Polish market. Unfortunately, we will experience a considerable difference. Therefore, the growth of the stock exchange is definitely in the best interest of the national economy, implying that companies use the parquet and the savings of the public thereby increase in value. Having regard to that, coming to terms on this issue with the government proved to be quite straightforward. We made various development and regulatory proposals, and I hope that official announcements are soon to come.

What exactly is BÉT supposed to do to make a listing more attractive to Hungarian companies?

Our primary task is to encourage companies to move up the corporate hierarchy and make enduring efforts to set foot among successful and export-ready enterprises. For that reason, we offer new services, we launch training and educational programmes and we provide mentoring, we make our best endeavours to promote capital markets among Hungarian executives. We have also established a platform focusing on small-and-medium-sized enterprises, in particular. Such a segment has been operating in London for 25 years, and the same kicked off also in Warsaw 10 years ago; so it is high time for us to launch our own programme.

Have you managed to attract the attention of domestic executives?

We have started the negotiations, many domestic executives showed interest. I had highly positive experiences: successful Hungarian companies are mostly lead by humble, persistent and industrious people. Some of them already make a billion in revenue, still they keep working hard and do not seem to be “stuck up”. It is a pleasure to see them, and we strive to get in touch with more and more companies. We use a kind of screening and scoring to check whether a company could make any use of the stock market. At the same time, it is of paramount importance to share our mission with other stakeholders by engaging banks, investment companies and advisory firms in order to spread the word. Once we have managed to establish partnership in this respect, then we will not have to build the market on our own, but instead, fashionably speaking, an ecosystem might emerge.

Do you see any positive signs thereof?

 Certainly, yes. There are excellent companies in Hungary, however all of them are a little different. No uniform practice is applied. We consult each of them individually, sharing unique ideas. I find it quite interesting that there are several successful companies which operate in a highly profitable fashion, yet they resort to no external financing, not even bank loan, as they have always re-invested their own resources into the business. One might think that they still are very far away from a listing. Should they, however, choose to shift up a gear and target international markets after a period of careful growth, they can accelerate their corporate transition by partnering with external investors.

These companies are mostly family-owned…

Yes, but that has nothing to do with their listing considerations. If the family realises a part of its performance from the past years or decades, the company might as well go public with the family retaining control. Although it is unusual to see Hungarian family-owned companies on the stock market, a large number of highprofile European vendors are partly or wholly family-owned. In these cases, the company’s management, obviously, is not purely made up of relatives, but the family keeps a leading packet. Such companies form the backbone of the Italian, French and Portuguese economies and every third vendor on the exchange operates with a family-owned background. An increasing number of family-owned companies in Hungary are on the doorstep of their first generation change, in which case capital market options are worth considering.

We did not see many success stories in the domestic parquet. How persuasive do you think your arguments are for a listing in Hungary?

In my opinion, the Hungarian corporate sphere is aware that the stock market has by now made a clean sweep. They equally understand why it has been lacking in focus until now, and why it is important as well as why it has excellent perspectives. I firmly believe that by the time this interview is published, we will have been over two successful listings. This is vital, for the increasing supply will make demand as well.

Demand is important, indeed. What kind pf inverstors can a freshly listed company expect on BÉT?

At first, a new vendor may rely upon domestic investors: the great public on the one part, and highly affluent institutions on the other part, including insurance companies, investment funds and retirement benefit funds. It is within their portfolio that Hungarian stocks need to penetrate the markets. Subsequently, over a certain size, classical foreign investors appear, of course.