Hungary: Tisza landslide ends the Orban era
Hungary’s 12 April parliamentary election delivered a more decisive result than markets had positioned for. Peter Magyar’s Tisza Party secured 141 seats in the 199-seat parliament on 55.2% of the vote, while Fidesz took just 52 seats with 36.7%, giving the incoming government a two-thirds supermajority and ending Viktor Orban’s 16 years in power on record post-1990 turnout of 78.9%. The market reaction was overwhelmingly positive with BUX Index rallying 10% in local currency over the month. Large caps led the surge – OTP, MOL, Richter and Magyar Telekom all gained – while mid-caps perceived as politically aligned with the outgoing government, notably 4iG and Opus Global, fell sharply. The forint strengthened 5.3% against the euro over the month, taking the local currency to a four-year high.
The move primarily reflects the unwind of a long-standing political risk premium rather than a near-term earnings shift. A two-thirds majority gives the new government the legislative scope to revise the sector-specific windfall taxes that have squeezed banks, energy firms and retailers, and to address the rule-of-law dispute with Brussels that has left around €18bn in grants and loans frozen, including nearly €10 bn from the Recovery and Resilience Facility set to expire at the end of August. With central bank still holding its policy rate at 6.25%, against 3.75% in Poland, there is also visible scope for monetary normalisation supporting bonds and the currency through the second half of the year.
The first three weeks of the new administration have been encouraging. Magyar’s cabinet was assembled at pace, with the first ministers (foreign affairs, finance, economy) announced on 20 April and the formal investiture scheduled for the parliament’s inaugural session on 9 May. Andras Karman, a former member of the EBRD board, has been named finance minister. On 29 April Magyar met Ursula von der Leyen and Antonio Costa in Brussels, with both sides agreeing to finalise a political agreement by late May aimed at unlocking the frozen funds. Reform sequencing has reportedly been narrowed to areas achievable before the deadline, with slower constitutional changes parked for later. The priority list centres on combatting corruption, restoring judicial independence, and safeguarding press and academic freedom. Tisza has also signalled commitment to the Maastricht criteria by 2030 to prepare for eventual euro area accession.
We remain constructive on Hungarian assets over the long term but note that the easy gains in the equity market are behind us. The fiscal starting point is poor – the state budget deficit reached HUF 3,420 billion in Q1 alone, accumulated under the outgoing Orban government – which constrains how quickly the new administration can dismantle the windfall taxes that have compressed bank, energy and retail margins. The mooted tax package is also more left-leaning than the post-election narrative implies, with a progressive personal income tax via targeted credits and a discussed wealth tax, both of which play better in Brussels than with foreign capital. From here, the cleanest binary catalyst for the next leg is the late-May political agreement with the European Commission. We see selective rather than broad index-level upside in Hungarian equities, concentrated in names where windfall-tax relief and EU-fund inflows translate most directly into earnings.
