Magyar Telekom & Hungary & Forinth

Magyar Telecom

In case someone is interested in even more in depth details with regard to the SEC settlement, you can read much more here.

However I find it interesting on which basis the fine was based at the end:

Because Magyar Telekom and Deutsche Telekom were “foreign issuers,” jurisdiction under the FCPA’s anti-bribery provisions require “use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance” of a bribery scheme. The sole jurisdictional allegations in the enforcement action (other than the companies made filings with the SEC) are two e-mails that passed through, were stored on, and transmitted to servers located in the U.S.

That sounds like a joke if one thinks about all the Chinese fake RTOs, but unlike Europe, the SEC has no jursidiction in China.

In a WSJ article it was stated that Magyar had to increase its reserve by 30 mn USD. So Q4 earnings will definitely get a hit.

General situation Hungary

However another interesting post on FT alphaville about the current situation in Hungary

Before going into panik mode, I think Hungary teaches some interesting lessons for the Euro zone:

1. Having your own currency is not always an advantage, especially if you are a smaller country
2. Inflating your way out of debt does only work if you can keep interst rates down (difficult for small countries)
3. I think Greece, Portugal etc. will watch this very closely. It might lessen their appetite to leave the Euro considerably

The Forinth is now seriously undervalued. Currently it trades at 250 HUF/USD, according to OECD data, the PPP level would be 129 HUF/USD. In EUR terms, the Forinth trades at an all time low:

Summary: From my point of view, the underlying investment case for Magyar (elimination of special tax) is still intact. The situation in Hungary is difficult to predict, but the situation will remain volatile. Fundamentally, the Forinth looks extremely undervalued. So for the time being I will keep Magyar.

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