The Hungarian Financial Supervisory Authority has published a report into the pros and cons of listing on the Budapest Stock Exchange.
The report analyses the structure of the Hungarian capital market and its role in corporate financing. It concludes that the exchange offers Hungarian companies a good means of development and of securing additional financing. Listings on the exchange have increased as a result of the major privatisations of the 1990s and also Hungary's accession to the EU. Legal and financial measures are due to be introduced by the government in 2006 to give a further boost to listings.
Key features of the report are:
- An overview of the corporate sector in Hungary and the rest of Europe
- Analysis of the economic environment
- Analysis of share and bond markets
- A comparison between various forms of financing
The report examines why so few multinational companies choose to raise capital by debt and equity financing rather than by listing (particularly motor companies, insurance companies, banks and shopping malls) and concludes that this is due to:
- financing costs (not costs of seeking a listing but costs of meeting investors' yield expectations)
- investor preferences to seek a listing on one of the larger capital markets in other countries
- companies not being ready for listing due to small capitalisation
- the benefits of not being listed, such as not having to make public disclosure of bad news and of other information which may assist competitors.
By comparing the costs of listing with debt/equity financing, the report finds that there is a break-even point of around HUF 100 billion (approximately €400 million) above which it is more cost-effective for companies to raise money by listing their securities.
To reads the report in full, click on (or cut and paste) this link:
http://www.pszaf.hu/resource.aspx?ResourceID=publ_egyeb_tokepiacszerk
For more information, please contact Dr. Anikó Kircsi at aniko.kircsi@cms-cmck.com or on +361 483 4827.
