Does Hungary want a stock market?

Talk to analysts outside Hungary and they express mystification at what they see as the country's apparent lack of support for the development of its stock market. Part of the problem, they say, is that economic growth is being driven so forcefully by inward flows of foreign direct investment (FDI), which in turn has the effect of diverting companies away from the Budapest Stock Exchange (BSE). "Inflows of FDI practically never manifest themselves in new stock market listings," says Frances Cloud, analyst at Nomura in London. "If they take the form of greenfield factories the companies in question don't list on the market, and if it's a question of taking over a local company it usually means the delisting of the stock. We are getting to the point in Hungary where some of the biggest companies are effectively disappearing from the stock market because their free floats are diminishing to practically zero." The problem, says Cloud, is especially pronounced in the chemicals sector.