Poor Economic Forecasts Worry Investors

Due to weak economic expectations in 2009, many investors have withdrawn from the market, and most analysts expect a continuation of low liquidity on the Zagreb Stock Exchange today.

Of the nine analysts who participated in Hina’s survey, four expect a decline in Crobex today, three expect an increase, and two expect stagnation. The Crobex index plummeted 4.74 percent yesterday, to 2,112 points. Regular trading volume amounted to only 33 million kuna,"I expect the Crobex to continue sliding. Such a low level of trading and uniform trading indicate that there is almost no interest in the stock exchange. Caution prevails among investors, as new warnings, bad news, and forecasts about next year arrive every day," emphasizes Goran Vorkapić, broker and investment advisor at the brokerage firm To One.

Caution also prevails on global stock exchanges. Few sectors, whether it be the automotive industry, construction, or coffee sales, are spared from declining consumption, which is why stock prices on Wall Street fell for the second consecutive day yesterday, by approximately 2 percent. This morning, stock prices on most Asian exchanges also fell as more news confirms that the world’s largest economies are sliding into recession, and a number of companies are lowering their future business forecasts.

Yesterday’s statement by Prime Minister Ivo Sanader that there is no reason for pessimism in Croatia due to the global financial crisis, but there are reasons for seriousness and facing problems, along with analysts’ estimates that economic growth in 2009 could slow to 2 percent, has worried investors, some analysts in Hina’s survey point out. They also link this to yesterday’s increased selling that occurred in the last hours of trading and caused the Crobex to drop by 4.74 percent.

In conditions where many things are still unknown in both the global and domestic economy, and expectations are poor, most investors have decided to withdraw from the market until the situation becomes clearer, says Vorkapić."Stock prices are now so low that they largely account for the expectation of a poor 2009 in economic terms," believes Vorkapić.

Today, Prime Minister Sanader will hold a working meeting with representatives of HUP, trade union centers, management of companies predominantly owned by the Republic of Croatia, the Croatian Association of Counties, the Association of Cities, and the Association of Municipalities of the Republic of Croatia. The meeting will discuss the possibilities of reaching a social agreement in the context of the global financial and economic crisis.

At yesterday’s meeting with representatives of HUP and trade union centers, it was agreed that employers would not use the situation to get rid of workers who are already surplus, although HUP President Damir Kuštrak announced that there would still be layoffs. Media reports suggest that unions are being persuaded to agree to a wage freeze policy for the next year. Market participants are also awaiting the first indications of the proposed state budget for 2009, primarily in the segment of planned investments in infrastructure projects.