As in most European countries, the outbreak of World War I brought about the exchange’s closure on 27 July 1914, although trading did not cease. Brokers continued trading during the war and equity prices showed a massive increase starting in 1914. By 1918 over 7.2 million securities had been traded in a year.
The exchange reopened after the war were, the post-war inflationary environment pushed exchange turnover to exceptional highs, tempered only by the introduction in 1925 of the country’s new currency, the pengő. The following four years leading to the market crash of the New York Stock Exchange in October 1929 saw the downturn of the BSCE. On 14 July, 1931, the BSCE was closed down again as a result of a German banking moratorium and a series of financial collapses of the continent’s major banks. Bond trading officially resumed only in 1932, followed by trading in the 18 most traded equities. Following a short period of recovery, the market entered an expansionary phase in 1934, reaching its peak in 1936.
When Hungary entered World War II, the exchange saw a period of unprecedented boom., and equity prices in the heavy and military industries increased manifold. In 1942 the government applied stricter measures for the BSCE articles of incorporation, prohibited private trading in equities, required specific reporting obligations on equity portfolios and set maximum values on daily price changes. Despite these restrictions the exchange was able to continue its operations until the start of the city’s siege in mid-December, 1944.
World War II was followed by a period of hyperinflation, characterized by a lively private stock and real exchange trading in currencies and precious metals, conducted partially in the damaged building of the exchange and partially in the neighbouring coffee-houses. The exchange officially re-opened in August, 1946, following the launch of the forint on August 1. As companies defaulted on their payments of bonds issued previously in the crown and pengő currencies, and since limited companies failed to pay dividends on their stocks due to the war damages they suffered, prices kept falling., Two months after the 1948 nationalisation of the majority of private Hungarian firms, the government officially dissolved the Budapest Stock and Commodity Exchange, and the exchange’s assets became state property.
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