Hungary Stocks and Forint Jump as Orban Defeat Starts New Era

Hungary’s forint surged to a four-year high and local stocks jumped to a record after Prime Minister Viktor Orban’s election defeat. The opposition’s landslide win is buoying markets on expectation the result will help unlock European Union funding and revive the economy.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — Hungary’s forint surged to a four-year high and local stocks jumped to a record after Prime Minister Viktor Orban’s election defeat. The opposition’s landslide win is buoying markets on expectation the result will help unlock European Union funding and revive the economy.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.The forint appreciated 2.1% to 366.85 per euro as of 11:16 a.m. in Budapest, the strongest level since 2022. Hungary’s dollar bonds were the best performers across emerging markets while the BUX stock index jumped by as much as 3.3%, even as global assets fell on Iran risks.The scale of the victory, with Peter Magyar’s Tisza party grabbing a two-thirds supermajority in Sunday’s ballot, is giving fresh impetus to the Hungary election trade which has already sent local assets rallying.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.The vote result represents a “new beginning” for Hungarian assets, said Soeren Moerch, a money manager at Danske Bank AS. “Orban has accepted defeat, and Magyar is saying all the right things,” Moerch said. “Obviously, the HUF will rally and spreads will tighten—good news for Hungarian assets. We have been buying for the last three months in expectation of something like this.”The results are an overwhelming rebuke to Orban’s self-styled “illiberal democracy,” which has been backed by US President Donald Trump and Russian leader Vladimir Putin. With almost 99% of the votes counted, Tisza was set to win a supermajority that will allow it to pass legislation unopposed and dismantle the system Orban built over 16 years in power.‘Orderly’ Handover“A supermajority was not the base case and came as a genuine surprise,” said Kurt Knowlson, a senior portfolio manager at Aviva Investors. The result “materially reduces Hungary’s risk premium on a structural basis.”Furthermore, the apparently “orderly concession of power removes a key near‑term uncertainty” and “is itself being viewed as a further positive signal,” he said.Watch: Hungary’s Orban Concedes Loss in Landslide Election (Video)The bullish reaction in Hungary comes on a day that global markets retreated as the US boosted pressure on Iran to give up its nuclear energy program at the risk of further limiting global oil supplies.Euro PlansMagyar’s ascent to power is seen helping unblock access to the equivalent of about $20 billion in EU financing, which has been frozen by Brussels due to rule-of-law breaches by Orban’s administration. Tisza has also vowed to take steps toward joining the euro area, which would reduce Hungary’s borrowing costs, currently among the highest in the EU. The yield on 10-year local-currency government bonds has averaged about 7% over the past 12 months. “The forint should continue to appreciate, and the HUF curve should bull flatten,” Barclays Plc analysts Ercan Erguzel and Marek Raczko wrote. Once global risk sentiment stabilizes, the Hungarian elections should also support the euro and regional currencies, they added.On the Budapest equities market, oil company Mol Nyrt. and top lender OTP Bank Nyrt. led the gains by index points. Meanwhile, shares of firms linked to the Orban government tumbled. Opus Nyrt., a holding company with assets in construction and agriculture controlled by Lorinc Meszaros, an Orban ally, fell as much 27%. 4iG Nyrt., a telecommunications and defense company propped up by the outgoing government, fell as much as 20%.“Opus and 4iG showcases what went wrong with Hungary’s equity capital market over the last years,” said Matthias Siller, a fund manager at Barings. The election result, expected boost to Hungary’s economy and the strengthening forint will create a “good angle for equities,” he said.Wagers on a seismic shift in Hungarian politics had already helped the forint surge 7% against the euro and 21% against the dollar last year — the most among major emerging-market peers behind the seldom-traded Russian ruble. “We can expect a significant thaw in relations between Budapest and Brussels,” said Michał Jóźwiak, a currency analyst at Ebury. That should lead to the release of EU funds as well as low-interest loans for defense spending, providing a “significant growth stimulus for the Hungarian economy,” he said. —With assistance from Peter Laca, Matthew Burgess and Srinivasan Sivabalan.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. 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