HUNGARY: Investors' nightmare continues
Hungary's financial markets have rebounded from Russia's August 1998 Financial meltdown but for many local investors the nightmare will continue until 2006. Last month the Investor Protection Fund started to compensate the clients of bankrupt London Bróker, whose activities had been suspended almost a year ago. But since the Protection Fund does not have the money to pay the Ft2.4 billion ($8.9 million) in losses to thousands of small investors, it must spread the payments over the next five to six years.
While London Bróker is one of the biggest securities firms to go out of business, it probably will not be the last. "I think there are still a few more bad peppers in the pot," says Péter Farkas, head of the Protection Fund. The trouble is, if another broker goes under, hapless clients will not begin to see their money until after 2006. Sixteen brokerage houses have gone bankrupt in Hungary since the Asian and Russian crisis ripped through the country's financial sector and demolished people's confidence in the industry. The tempests came just when local investors were starting to view securities Firms as a legitimate outlet for their savings.
"Then the Russian crisis came and we travelled back in time," says György Jaksity, managing director of Concorde Securities in Budapest.