Strategy Note /

Hungary: Orban's big win is unexpected and means more of the same

  • Orban's Fidesz wins 53% of votes, 18pp more than joint opposition, versus a 5pp lead in last opinion poll

  • High inflation, unemployment and fiscal deficit constrain antagonism with EU ('pro-family', anti-Ukraine)

  • Equities (bank OTP, oil & gas MOL, pharma Richter Gedeon) on 35% discount to 5y median PE

Hungary: Orban's big win is unexpected and means more of the same
Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

Tellimer Research
4 April 2022
Published byTellimer Research

Hungary's Prime Minister Viktor Orban and the ruling Fidesz party have won the 3 April election with an even higher share of votes than expected. Fidesz-KDNP won 53% of votes and the joint opposition won 35%, compared with the 50% and 45%, respectively, implied by the last opinion poll forecasts prior to the election.

This means that the super-majority (over 66%) in parliament is likely intact and Hungary is in store for more of the same illiberalism in domestic politics and antagonism with the EU, both over social policy and Russia-Ukraine policy (specifically, arms supply to Ukraine and support for President Zelensky).

But Orban also faces pressure to combat high unemployment (3.8% in 2022, according to IMF forecasts) and high inflation (8.3% last reported), at a time when the fiscal deficit is heading for 5.9% of GDP in 2022 (IMF), and the real interest rate is negative 3.9%. For now, this acts as a constraint on how much he is willing to rail against the EU and jeopardise EU funding.

Hungary Inflation and Unemployment both on the increase

Fiscal deficit blew out during Covid and remains wide

Equities (BUX Index) were flat in reaction, having risen 17% since the start of March.

That leaves forward PE valuation on a 35% discount to the five-year median and trailing PB valuation on over a 25% discount to the five-year median, which is more attractive than that seen in most EM Europe peers.

Hungary equities are dominated by three stocks: OTP Bank, MOL Magyar Oil & Gas and Richter Gedeon in pharma.

Hungary equities on a 35% discount to 5y median PE

Hungary equities cheaper vs history than EM Europe peers

Related reading

Hungary: Orban's Fidesz favourite to win tightest election since 2006, 1 Apr 2022