Hungarian shares & bonds – an historic overview

By Dr. Peter Vanyai

Published in print (with additional illustrations) in ‘Scripophily’, the journal of the International Bond & Share Society, March 1998

Copyright ã International Bond & Share Society 2001

Hungary achieved its one thousandth year as a state in 2001. Throughout European history, Hungary has often played the role of a buffer state between East and West; its territory increased or decreased, depending on the political situation. For example, in the 14^th century, the Kingdom of Hungary had a coast on three different seas. Although this was exceptional, a part of the Adriatic coast nearly always belonged to Hungary, although now our only ‘sea’ is Lake Balaton.

The period of Hungarian history most relevant to scripophily started in the 16^th century with the formation of the Austro-Hungarian Monarchy. Until 1867 Hungary played a subordinate role within the Monarchy, and during the first phase of the reign of the Habsburgs, the Hungarian economy was relatively modest. So Hungarian papers documenting share ownership and loans appeared later in Hungary than in western Europe. The oldest Hungarian papers date back to the first half of the 19^th century. Prior to that, all the bonds and shares available in the country were of Austrian issue, with text in German only. Some examples from the first generation of genuine Hungarian scripophily are the decorative, rare and expensive Balaton Company (1844) and the Vukovar-Fiume Railway Co (1847).

Twenty years after the Habsburgs defeated the Hungarian people’s fight for independence in 1848-49, they offered a compromise to the Hungarians, which constitutes the next milestone in the history of Hungarian bonds and shares. Hungary became an independent Kingdom within the Monarchy, which brought an acceleration in the development of economy. The Hungarian Stock Exchange was founded in 1871.

Increasing social mobility, primarily the abolition of serfdom, was a necessary precondition of economic development. Liberated serfs, however, did not possess any land, and the state issued a bond in 1889 to finance the costs of free land distribution.

Mining was an important industrial sector, represented by a share of the Hungarian General Coal Mining Co. (1869). This same company issued a share about 60 years later (1926). The earlier share is real rarity, while the latter one is more common. The industrial boom of the end of the 19^th century is very well illustrated by the shares of the Tarnoczy Fire-fighting Equipment and Fire-engine Factory.

Most collectors agree on the exceptional attractiveness of the share of the Hungarian River & Sea Shipping Company (1895). Although 500,000 of these certificates were issued, most of them were in state ownership and were destroyed during the first years of the Communist era. It is estimated that no more than 500 pieces have been preserved.

Hungarian railway shares are of special interest, due to the great number of companies operating in Hungary – there were approximately 200 railway companies. The Pecs-Bataszek Local Railway Company is just one of the numerous examples that could be quoted. The shares of many of these companies were issued in relatively small numbers, for example only 620 of the Pecs-Bataszak, just a few of which exist nowadays. It is worth mentioning that this share has an unusually high nominal value – you could buy a block of flats for 5,000 crowns in 1911.

As for banking, it would be impossible to give even a rough outline of the more than one thousand banks that used to operate in Hungary. Let me quote one interesting fact^^^: the Hungarian National Bank was founded only in 1924 – before that there was no national central bank. The beautiful and rich design of the share of the Bank reflects the pride felt in its formation.

Following World War II, industry had to be rebuilt, and economic life started to recover, but this process was abruptly stopped by the Communist regime in 1947. Especially during the initial ‘hard’ phase of Communism, all documents originating from the previous, capitalist era were confiscated and destroyed by the state^^^; holding them at home was a crime. This is the main reason for the fact that most Hungarian papers have survived in very small quantities only.

Only one type of bond or share paper was issued during the Communist regime: the Peace Loan Bond. These were lottery-type bonds, of which there were seven different issues from 1949 to 1955. The bonds were mainly redeemed, and then destroyed, by the state. Very few examples have survived – only those forgotten by their owners. The socialist-realist illustrations of the seven successive issues give a vivid picture of the harder and softer periods of the Communist era.

Copyright ã INTERNATIONAL BOND & SHARE SOCIETY 2001

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