Hungarian Watch Autumn 2014
Hungarian Watch editions
Major railway construction deals in Hungary
Hungary plans to spend billions of EUR on developing railway infrastructure
Railway construction is a top priority in Hungary. The government intends to spend on railway infrastructural developments at least EUR 3 billion from 2014-2020 EU financial framework. In addition, the government also plans to participate in several EUR billion worth railway deals backed by Chinese loans. Switelsky, Közgép, Alstom, Bombardier, Stadler, Skoda, Pesa, and T-Systems may be involved in major projects. The future is extremely challenging, so investors should keep an eye on forthcoming tender developments.
Construction of South Stream Hungary may start soon
South Stream is the major global energy project which would secure the Russian natural gas supply to Western Europe. The EC opposes the project because of antitrust concerns, but member states are resolved to implement the deal. Hungary wants to start the construction of its section in the next six months. As selection of companies involved in the construction of the Hungarian portion of the pipeline may take place in the very next months, this is the last chance for investors to step in.
Who will the lucky buyer be?
Citigroup sells its Hungarian consumer businesses
Due to global strategic considerations Citigroup has just announced that it will sell its very attractive Hungarian consumer business. Citibank Hungary is one of the leading players in private banking and credit/debit card business. Most of the large universal banks operating in Hungary are very interested in such businesses. Therefore, some of the main competitors, such as KBC, Raiffeisen, Erste, Unicredit, GE Capital, Intesa Sanpaolo, Sberbank and AXA could become the potential buyers. Press suggests that Citigroup has just started to look around for interested buyers, so it seems that this is the perfect time to seize this exceptional investment opportunity.
A new Chinese market breakthrough
RZBC to establish a citric acid plant in Hungary
After the press had reported several golden Chinese investment opportunities, another Chinese player, RZBC announced to build its citric acid plant in Hungary. The new Hungarian factory would produce 100,000 tons of citric acid annually covering 5% of the global market. The investment volume is expected to be close to EUR 100 million. The project is in the relatively early stage, so it is still not too late to catch up with this investment opportunity.
MOL moving toward more acquisitions?
EUR 5 billion-worth DEA, the next potential target
After concluding major transactions with U.K operators, Wintershall and Premier Oil, the Hungarian MOL is likely to continue its expansion in the field of global exploration & production. We may shortly hear MOL announcing a new acquisition. The newest target may be DEA, a prominent player in the field of exploration & production. If the planned deal to sell DEA to the Russian Mikhail Fridman led group of investors falls apart, MOL will most likely reopen talks about purchasing DEA. It remains to be seen how the story will end, but it is evident that MOL has a strong appetite to expand further by purchases of equities of Western exploration & production companies.
Tesco is about to check out from its Hungarian operations
Tesco as one of the world’s leading grocery and general merchandise retailers might consider leaving the CEE region, including Hungary in order to strengthen its UK position. This would be a major opportunity for Hungarian competitors such as Aldi, Lidl, Spar, Penny, CBA, Auchan and Metro. As analysts give close to fifty-fifty chance for this strategic decision, investors shall carefully follow the upcoming developments of Tesco.
Only the best will survive in Hungary
Banking industry still in turmoil
The Hungarian banking industry is still in turmoil. Conversion of foreign exchange loans and the introduction of the bad bank will have a significant impact on the sector. There may only be room for five major banks in Hungary, noted Márton Nagy, the managing director of Central Bank of Hungary. On the other hand, the government is still resolved to purchase a new bank. Overall, it is worthwhile for investors to keep a close eye on the upcoming developments in banking.
Hungarian automotive industry is still out in front
New major investments expected
The automotive industry remains as one of the great success stories of the country. The press regularly reports about production expansions, improvement of supplier networks and new greenfield investments. Audi, Patec, BorgWarner, Robert Bosch and Alumental will soon make new investments. The automotive industry definitely deserves great attention.