You may recall the article I wrote about Brexit when I wondered who else might decide to leave the continent of disunity. Well, we may not have long to wait, but this time a country may actually be asked to leave. No, it’s not Greece. Their sin wasn’t as bad as Hungary’s. You see, Hungary had the audacity to decide what’s best for them.
According to the BBC, “Luxembourg Foreign Minister Jean Asselborn has called for Hungary to be suspended or even expelled from the European Union because of its ‘massive violation’ of EU fundamental values.” And what fundamental values are these? How about deciding who lives in their country, and if to make matters worse, Asselborn suggested that “Hungary is not far away from issuing orders to open fire on refugees.”
Seriously? And he calls himself a diplomat?
Do you get the feeling that this isn’t going to end well? If I were Hungary, I would jump the sinking ship. In my opinion, Hungary is one of the better investment opportunities in Eastern Europe, and with a forecasted GDP growth of around 3% in 2016, is ahead of France. One of the main drivers of GDP in recent years is electronics manufacturing; the country has become the largest producer of electronic goods in Eastern Europe.
Even amid strange regulations from the government and the spat with the EU, the economic climate remains bright. There’s a chance the spat may be worked out when the remaining countries in that most unholy of alliances meet in Bratislava, though I sincerely doubt it. What comes out of that meeting may warrant an article, probably more on the farcical side though.
As far as investing opportunities in the country are concerned, I would hold off on any individual stock purchases, but I would look at an ETF that is traded on the London Stock Exchange. The iShares MSCI Eastern Europe Capped UCITSETF (IEER) has about a 9% exposure to Hungary, with OTP Bank being the most prominent Hungarian company.
2017 should be an interesting year as countries like Germany and France try desperately to keep the union together. But all the glue, spit, and chewing gum they can gather will not hold. The European ship is heading towards an iceberg and the steering mechanism is broken.
Peter Kohli is the CEO of emerging market specialist DMS Funds.
