One concern I have had about the stock has been that the dividend has been more than the earnings. This no longer appears to be the case. However, as it turns out, the payout exceeding the earnings was never a big deal. A while ago a reader passed along information that MTA has a very involved relationship with Deutsche Telecom (DT) such that DT has put a lot of money into MTA as sort of a long term commitment.
This chart compares the benchmark BUX index to the S&P 500 for the last four years. For the first couple of years the correlation looks kind of close then as emerging markets got hot, the BUX separated from the S&P.
Hungary is front and center in the Eastern European theme. The country is growing quickly, it is modernizing, labor is cheap (compared to Western Europe, but not compared to Slovakia) and while it will never play a dominant role on the world stage it's role will be bigger than it is now.
One step to bigger would be if Hungary can join the EMU, it hopes to do this by 2010. Inflation is running below the 3% target, GDP has been growing in the 4% area for a while and direct investment n Hungary has been on the rise. Hungary is one of the high yielding currencies as 3-year bonds yield more than 7%. High yields could attract more foreign capital.
Hungary has a couple of warts. The current account deficit is a problem at 5% of GDP with visibility for it to increase. The various ratings agencies have all downgraded the outlook or the actual debt in the last few months. The currency (called the forint), like the kiwi and the Icelandic krona has recently weakened against the dollar.
The correlation of the forint to the kiwi is interesting in that I think it shows that structural economic problems may trump commodity-based diversification.
However, even though the currencies have traded similarly, the two stock markets have not.
If you want more information about Hungary I would suggest the Magyar Nemzeti Bank (the central bank) and the Budapest Stock Exchange.
2 comments:
I couldn't agree more on Hungary. It's a fascinating market and has a great long-term outlook despite a few 'warts.'
Unfortunately, this is one of those cases where small investors have a very limited set of tools to work with.
MTA is a model portfolio holding of mine in the Forbes International Investment Report, in large part because I want Hungary exposure but I am limited to ADRs and there aren't many to choose from.
I think this is a case where you should spend a couple bucks and pay a good manager to do the stock-picking for you. Take a fund like EUROX, the US Global Eastern Europe fund. This has a five-star Morningstar rating and has a lot more interesting weapons in its arsenal than MTA.
Granted it's not a pure play on Hungary and it's not cheap (expenses run nearly 1.9% of assets). But, as in many emerging markets, you get what you pay for, and hiring an experienced guide can be worth every penny.
thanks for the comment John
For now Hungary is far an few between as we have both said. One of the bigger stocks in Hungary is OTP Bank. It can be traded here (Schwab has it through its global desk) under ticker OTPBF. This is one of the big companies but getting info is difficult. I looked on Trustnet.com and the LSE's site to see if there might be a UK traded fund but I found none.
I would also add there could be more deficit realted fallout. Nicole Elliott from Mizuho thinks that the forint could be in for a 2003-like decline and thinks rates on Hungarian bonds could lift another 100 basis points.
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