Hungary is still neglected by most international investors. However, there are several reasons why it is worth considering an investment in the central European country. In this article, we analyze the 3 most important stock market indexes in Hungary.
Hungary, located in Central Europe and surrounded by various neighbouring countries, has one of the fastest growing economies on the continent. With a population of almost 10 million people, Hungary has developed significantly over the last three decades.
Although the country was under communism until the early 1990s, it has managed to build a very dynamic market economy, with very little unemployment and extremely high growth rates.
If we take a look at data from Eurostat, we will see that Hungarian GDP per capita is very similar to that of Portugal and Poland. Compared to Spain, GDP per capita in Hungary is only 10% lower. And its growth trend is much more positive.
Hungary’s stock market operates on the Budapest Stock Exchange, which was established in 1864, making it the oldest exchange in Central and Eastern Europe. After the fall of communism a few decades ago, it reopened in 1990. Nowadays, it is part of the Vienna Stock Exchange group, along with other stock exchanges in the region.
Despite the country’s economic achievements since the 1990s, Hungarian stocks receive very little attention from international investors and the financial press.
Investing in Hungary’s stock market can offer investors the opportunity to diversify their portfolios and benefit from the country’s high economic growth rates. Hungary has a very attractive tax regime and pro-growth policies. However, its currency, the Hungarian forint, is one of the most volatile in Europe.
For those interested in investing passively in Hungary, that is, without having to select individual stocks, it is important to be familiar with its most important stock market indexes.
The BUX is the main stock market index of the Budapest Stock Exchange. It was introduced in January 1991, shortly after stock market trading resumed after the end of communism in Hungary. The index was launched with an initial value of 1000 points and is calculated by the Budapest Stock Exchange itself.
The BUX is designed to track the performance of the major publicly-traded companies in the country. The number of stocks in the index fluctuates between 12 and 25, depending on how many meet the eligibility criteria, as well as the decisions taken by an expert committee.
In this regard, all these companies must be large enough or have significant transaction volumes on the exchange.
The weighting of these companies within the index is based on their market capitalization adjusted for free float. No upper cap is imposed on the weight a stock can have.
The most important companies in the BUX are OTP Bank, a financial institution, MOL Group, a natural gas and oil company, and the pharmaceutical corporation Gedeon Richter.
You will find more details about the BUX on the official website of the Budapest Stock Exchange.
The BUMIX is the second stock market index in Hungary. Also calculated by the Budapest Stock Exchange, it was introduced in 2004 to include companies with a medium or small market capitalization. Its initial value was also set at 1000 points.
The BUMIX has many things in common with the BUX. It is also made up of between 12 and 25 companies that are weighted based on their free float-adjusted market capitalization.
In this case, obviously, the criteria for market capitalization and transaction volume are lower than in the BUX.
For more information about the BUMIX, visit this website.
Finally, the MSCI Hungary is a stock market index calculated by the US company MSCI. It includes all Hungarian companies that are part of the global MSCI Emerging Markets Index.
The number of stocks within the MSCI Hungary fluctuates over time, but is usually very low. Often, we will find only three companies in it, so it is highly concentrated. These are usually the same OTP Bank, MOL Group and Gedeon Richter that also dominate the BUX.
More information about the MSCI Hungary can be found on the MSCI website.
I hope you liked this article about stock market indexes in Hungary. If you want to learn about stock indexes in another important Central European country, visit this link:
Top 4 Most Important Stock Market Indices in Austria
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