March 9, 2016 / 10:24 AM / a year ago

UPDATE 1-Hungary approves plan aimed at boosting stock market

(Adds more details)

By Gergely Szakacs and Marton Dunai

BUDAPEST, March 9 (Reuters) - The Budapest stock exchange, now majority-owned by the central bank, approved a new strategy on Wednesday to boost new listings and attract new investors, helping the government's efforts to buoy the economy.

The National Bank of Hungary, run by Prime Minister Viktor Orban's close ally Gyorgy Matolcsy, bought a majority stake in the stock exchange in November, in a move seen as another state attempt to help prop up the economy.

Matolcsy has helped Orban's economic policies with interest rate cuts and a massive funding for lending programme in the past three years.

The Budapest Stock Exchange's new strategy for 2016 through 2020 aims to end a dearth of listings and reverse a fall in turnover seen over the past years, just as the central bank starts to trim back its massive cheap loans programme.

Hungary's stock market index surged almost 44 percent last year, and is currently trading at six-year highs, but its capitalisation is lower than regional peers, new listings are scarce and volumes remain below pre-crisis levels.

"Right now the most pressing task is to help successful listings by having companies go public that meet the high quality standards required to strengthen investor confidence," the bourse said in a statement.

"It is also important that listings take place at pricing levels that provide room for future price increases."

The bourse wants to boost the number of large liquid shares to at least five from a current three to four, and use European Union funds to develop the capital market in close cooperation with the government, it said.

It will aim for five share or corporate bond listings per year and boost stock market capitalisation to about 30 percent of gross domestic product from less than 20 percent today.

It said new issuance could come primarily from state-owned companies, and the government would examine the possibility of listing some companies. It did not name specific companies.

The bourse is also in talks with the Economy Ministry about a new package of regulatory incentives, it said.

Monika Kiss, an analyst at brokerage Equilor said increased transparency would be important for prospective new exchange members.

"We are very positive about new listings," Kiss said. "Increasing transparency is the number one task for those companies who seek to enter the market."

Hungary, whose debt has been rated "junk" since 2011 due to Orban's unpredictable policies and the country's high debt, is expected to regain investment grade status this year thanks to its improved fundamentals. (Reporting by Gergely Szakacs and Marton Dunai; editing by Susan Thomas)

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