Will the negative trend continue on the ZSE?

Large declines on Asian stock markets and a gloomy start to trading on European exchanges could negatively impact today’s sentiment on the Zagreb Stock Exchange, according to most analysts, as investors are currently more focused on poor business results from global companies than on the very good results from domestic companies.

Of the eight analysts from brokerage firms, five expect a continuation of the decline in Crobex today, while three expect stagnation. The Crobex index closed last week with a loss of 13.39 percent, at 2,193 points, which is its lowest level since March 2006. Regular trading volume amounted to nearly 421 million kuna. “Last week, the Zagreb Stock Exchange experienced its second worst week of the year, marked by a 13.4 percent drop in Crobex, along with drastically reduced trading volume,” comments Žaran Perić, an investment advisor at the Karlovac brokerage firm EA Sistem.

The largest correction was suffered by the shares of Atlantska plovidba, which plummeted 32.7 percent over five trading days, with a solid trading volume of 50.6 million kuna. The reason for this is the poor situation in the global shipping market due to decreasing demand. Prices of all other shipping companies have also sharply decreased, with Perić noting that Jadroplov’s stock touched 166 kuna, the lowest level since November 2004. The new sharp correction in stock prices has brought some of them to new lowest levels in recent years. Thus, the stock of Adrisa, which closed last week at 240 kuna, is now trading at levels from November 2003, notes Perić.

“This week we are expecting new business results from domestic companies. However, investors are currently reacting more to negative business results from European and global companies than to the very good financial results from domestic companies, which further indicates that our capital market, although there is neither a financial nor an economic crisis in Croatia, is deeply influenced by the crisis in the global capital market,” assesses Perić.

Last week, business reports from Končar Elektroindustrija and Zagrebačka banka were published, showing strong growth in profits and revenues. However, this did not prevent a sharp correction in their stock prices. This weekend, we again witnessed efforts by global lawmakers to mitigate the crisis, notes Perić, but today’s sharp decline in Asian markets shows that this has once again been ineffective. Indeed, the Nikkei index on the Tokyo Stock Exchange plummeted 6.4 percent today, to 7,162 points, the lowest level since October 1982, and stock prices on other Asian exchanges also sharply fell as investors fear that even central bank interventions will not be sufficient to prevent a global recession.

At the start of trading on European exchanges, stock prices also fell sharply this morning. “I do not expect a better situation on the domestic market today either. Trading will likely be marked by a continuation of the negative trend with reduced trading volume,” says Perić. He adds that investors are eagerly awaiting the GDP data for the third quarter of this year, which is expected to be released on Thursday. Analysts expect a 0.5 percent decline in the largest global economy, while some analysts believe that the data for the last quarter of this year will be much worse, which would mean that a recession has taken hold in the U.S. economy. “Along with the U.S. GDP, several other economic indicators from the U.S. and the Eurozone are expected to be released, which should show in which direction the global economy is heading, and thus the capital market,” concludes Perić for Hina’s financial service.