The stabilization of what was previously extremely high volatility and low liquidity are the main characteristics of last week’s trading on the Zagreb Stock Exchange, where the Crobex index ended the week almost unchanged.
After falling to 2,032 points at one point early in the week, the lowest level since mid-January 2006, the Crobex index recorded slight gains in the second half of the week, reaching 2,192 points on Friday, which is only 0.05 percent lower than a week earlier. The calming of sudden price fluctuations in stocks was accompanied by a decrease in regular trading volume, which amounted to 284 million kuna, a third less than the previous week.
"Last week on the domestic stock exchange was marked by significantly lower liquidity than the week before. The reason for this should primarily be sought in the financial weakness of mixed and equity open-end investment funds, which, after significant sell-offs in recent months, have only about 7 billion kuna in assets, of which about 800 million to 1 billion is the value of domestic stocks," emphasizes Tihomir Antunović, investment advisor at the brokerage firm Agram Brokers.
In the past year the assets of open-end investment funds with public offerings decreased from approximately 25 to around 8 billion kuna.
In the past year, the assets of open-end investment funds with public offerings decreased from approximately 25 to around 8 billion kuna. It is estimated that of the total asset decrease of 17 billion kuna, about 7 billion kuna represents a decline in the value of financial assets in portfolios, while about 10 billion kuna represents direct withdrawals of investments. A similar scenario is now anticipated in developed markets for the hedge fund industry. Therefore, it is expected that the sell-off of financial assets will continue in foreign markets, along with a further negative trend in price movements, notes Antunović. He points out that pension funds will be much more important players in the domestic market in the future. He also expects that the domestic market will enter a positive price trend somewhat earlier, precisely because of this segment of demand.
The most liquid stock last week was T-HT, with a turnover of nearly 84 million kuna and a price drop of 0.22 percent to 226.5 kuna. Following in liquidity was the stock of Atlantska Plovidba, with a turnover of nearly 35 million kuna. Its price fell by 1.24 percent to 790 kuna. Last week, market participants focused on movements in global stock exchanges, where stock prices rose significantly. However, summarizing the performance throughout October, it was the worst month in over 10 years on most global exchanges.
On the Zagreb Stock Exchange October was the worst month in history – Crobex plummeted by about 27 percent.
On the Zagreb Stock Exchange, October was the worst month in history – Crobex plummeted by about 27 percent. Last week, numerous financial reports from domestic companies were published, showing their solid performance in the first nine months of this year, and in most cases, double-digit growth rates in net profit. During the past week, the stock of Ericsson Nikola Tesla was in greater focus among investors. It achieved nearly 15 million kuna in turnover, and its price rose by 1.02 percent to 1,280 kuna. This company recorded a slight increase in net profit in the first nine months of 2008, to 106.7 million kuna, and an improvement in operating margin, primarily as a result of an increase in gross profit margin, emphasizes Goran Nimac, analyst in the Economic Research Department of Hypo Alpe Adria Group (HAAB*).
The rise in bond yields, or the drop in their prices, resulted in a decrease of the Crobis index by 1.75 percent last week, to 91.52 points – the lowest level in the history of the bond market.
"Sales revenues recorded a three percent increase year-on-year, to 1.3 billion kuna, primarily due to stronger growth in revenues in the domestic market, while exports recorded a somewhat modest increase. Due to the expected slowdown in global economic growth and consequently expected lower capital investments by companies, the revenue segment of Ericsson Nikola Tesla from business clients could come under pressure in the upcoming period," notes Nimac. During the next week, Nimac mainly expects investors to focus on the further development of the situation in global financial markets but also on the dynamics of the arrival of financial results from companies for the first nine months of this year, including T-HT and Atlantic Group. Antunović also commented on the events of the past week in the bond market. The rise in bond yields, or the drop in their prices, resulted in a decrease of the Crobis index by 1.75 percent last week, to 91.52 points – the lowest level in the history of the bond market.
"Unusual events last week could be observed in the long-term debt securities market where there is a strong rise in required yields. This is a result of the downgrade of the domestic credit rating estimates, but also possible speculation about a new issuance of long-term bonds, potentially with a higher coupon interest rate," says Antunović. (H)
* Employees of the Economic Research Department of HAAB and their family members have an ownership interest in the shares of Ericsson NT and T-HT.
