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Hungary’s 2026 election results have raised the possibility of a shift in the country’s policy direction, prompting cautious optimism among investors. Markets are watching closely for signs that the new political landscape could lead to improved policy credibility, better relations with the European Union, and a gradual normalization of Hungary’s risk premium. In this Q&A we address several questions investors are asking about Hungary’s outlook.

The results of Hungary’s recent election open the possibility of a reset in the country’s policy trajectory. While markets typically react to political outcomes in the short term, the more meaningful impact for investors will depend on whether Péter Magyar’s new government can rebuild institutional credibility and improve relations with European partners following Viktor Orbán’s 16-year tenure.

If policy normalization occurs, Hungary could benefit from stronger investor sentiment and a lower perceived risk premium. This would come on top of an equity market that has already delivered strong returns in recent years. The key limitation remains the relatively small size of Hungary’s investable equity universe (there are only three securities in the MSCI Hungary Index), which means the market may remain concentrated even as the outlook improves.

Hungary’s relationship with the EU is a key driver of its economic outlook because EU funding plays a significant role in supporting growth and public investment. In recent years, governance disputes led the EU to freeze roughly $21–$24 billion (€20–€22 billion) in cohesion and recovery funds, constraining fiscal flexibility and slowing investment.

EU structural funds have historically contributed several percentage points of GDP over a multiyear budget cycle by financing infrastructure, regional development, and other projects in Hungary. When these funds are delayed, public investment tends to weaken and pressure on government finances increases.

An improvement in EU relations could help unlock these resources and restore investment flows. Hungary’s recent supermajority outcome may also support progress on EU financial coordination, including approval of the EU’s $97 billion (€90 billion) joint borrowing program to support Ukraine and the potential release of an additional $6.9 billion (€6.4 billion) in EU funds currently withheld over governance concerns.

Overall, stronger engagement with the EU would likely support fiscal stability, public investment, and investor confidence in Hungary’s policy environment.

Generally speaking, Hungarian equities have performed strongly even against a challenging macro backdrop that included high inflation, tighter financial conditions, and policy uncertainty. The MSCI Hungary Index has been among the best-performing markets globally, delivering more than 46% annualized returns over the past three years and roughly 20% annualized over the past five, as of 31 March 2026.

This suggests that equity performance has been driven primarily by company-level fundamentals and sector dynamics rather than domestic political developments. Large listed companies—particularly in banking, energy, and telecommunications—have continued to generate strong earnings despite macro volatility.

Despite the strong performance of the equity market, valuations remain relatively low. Hungarian equities trade at roughly 7.6x forward earnings, representing a meaningful discount to both regional peers and the broader emerging markets universe.

At the same time, corporate profitability remains robust, with returns on equity in the high teens. This combination of low valuations and strong profitability is relatively uncommon across emerging markets and may help support investor interest if policy risks begin to ease (Exhibit 1).

EXHIBIT 1

High Returns, Low Valuations: Is This Hungary’s Equity Sweet Spot?

Hungary Equities Trade at a Discount to Emerging Markets

As of 30 April 2026
Source: FactSet, MSCI

Hungary Equities Deliver Stronger Profitability than Peers

As of 30 April 2026
Source: FactSet, MSCI

Hungary’s equity market is relatively concentrated, with a small number of large companies dominating index performance. Financials—particularly the banking sector—play a central role, alongside energy and telecommunications.

For investors, this concentration means that company-level fundamentals often matter more than broader macro trends. Earnings growth, balance sheet strength, and regional exposure can be more important drivers of returns than domestic political developments alone.

The central risk for Hungary is, we believe, execution. While the election outcome may create an opportunity for policy change, rebuilding credibility with investors and European institutions will take time.

Markets will likely watch for early signals in several areas:

  • Fiscal discipline and the government’s budget strategy
  • Institutional independence and governance reforms
  • Anti-corruption measures
  • Progress in restoring EU funding flows

The speed and credibility of policy implementation will ultimately determine whether the political shift translates into a durable improvement in Hungary’s outlook.

Despite trimming positions into strength, our team has remained constructive on Hungary—even prior to the election and the subsequent market rally—driven primarily by attractive valuations and robust company level profitability rather than the macroeconomic backdrop.

If Hungary succeeds in improving EU relations and restoring policy credibility, the country could see a gradual normalization in its risk premium. Given already strong corporate profitability and discounted equity valuations, this could make Hungarian equities increasingly compelling within the emerging markets universe.

For investors, the story may be less about a sudden post-election re-rating and more about the potential for a steady improvement in sentiment as policy developments unfold.

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Important Information
Published on 19 May 2026

Information and opinions presented have been obtained or derived from sources believed by Lazard Asset Management LLC or its affiliates (“Lazard”) to be reliable. Lazard makes no representation as to their accuracy or completeness. All opinions expressed herein are as of the published date and are subject to change.

The performance quoted represents past performance. Past performance does not guarantee future results.

Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in nondomestic countries may be less liquid, more volatile, and less subject to governmental supervision than in one’s home market. The values of these securities may be affected by changes in currency rates, application of a country’s specific tax laws, changes in government administration, and economic and monetary policy. Emerging markets securities carry special risks, including less efficient trading markets, a lack of company information, and differing auditing and legal standards. The values of securities in emerging markets countries can be extremely volatile; performance can also be influenced by political, social, and economic factors affecting companies in emerging markets countries.

The MSCI Hungary Index is designed to measure the performance of the large and mid cap segments of the Hungarian market. The index covers approximately 85% of the Hungarian equity universe.

The MSCI Emerging Markets EMEA Index is a free-float-adjusted market capitalization index that is designed to measure equity market performance in the emerging markets countries of Europe, the Middle East, and Africa.

The MSCI Emerging Markets Index is a free-float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The MSCI Emerging Markets Index consists of emerging markets in Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey, and United Arab Emirates. 

The indices are unmanaged and have no fees. One cannot invest directly in an index.

Mention of these securities should not be considered a recommendation or solicitation to purchase or sell the securities. It should not be assumed that any investment in these securities was, or will prove to be, profitable, or that the investment decisions we make in the future will be profitable or equal to the investment performance of securities referenced herein. There is no assurance that any securities referenced herein are currently held in the portfolio or that securities sold have not been repurchased. The securities mentioned may not represent the entire portfolio.

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