Investors Focused on News About the State Budget for 2009

On the Zagreb Stock Exchange today, most analysts expect the Crobex to rise, primarily due to positive movements in global markets, but they believe it is merely a short-term recovery, as new bad news related to the global economy is anticipated.

Of the nine analysts who participated in Hina’s survey, five expect the Crobex to rise today, three expect it to stagnate, and one expects a decline. After dipping below the psychological barrier of 2,000 points during the day, the Crobex index ended yesterday’s trading slightly up, by 0.01 percent, at 2,051 points. Regular trading volume amounted to 41.78 million kuna."After yesterday’s dramatic trading, during which the Crobex recorded a drop below the level of 2,000 points, a surprising turnaround occurred just before the end of trading, bringing the index back to Thursday’s level. A similar scenario was observed yesterday on Wall Street", says Kristian Korunić, investment advisor at the brokerage firm Šted-Kapital.

After falling to new lows in the last five years, U.S. stock indices surged sharply towards the end of trading, achieving gains of over six percent. Asian markets also saw prices rise significantly this morning as large losses from previous days were deemed excessive, despite numerous data indicating a recession in the global economy. The Tokyo Stock Exchange closed this morning with the Nikkei index up 2.7 percent from the previous day. The MSCI index of Asia-Pacific stocks, excluding Japan, jumped 3 percent, breaking a three-day downward trend during which it had fallen 11.4 percent. "Driven by this, we can expect an increase in indices on European exchanges today, provided the market does not face any dramatically bad news during the day. Accordingly, I expect a slight recovery in the index on the domestic exchange, but still with low trading volume," assesses Korunić. However, the sustainability of the recent rise in stock prices is questionable.

"On global exchanges, this is a short-term recovery in stock prices after sharp multi-day losses. It is not expected that this price increase will be sustained, as new bad news from the U.S. related to the recession, as well as poor corporate results, will surely arrive," notes Korunić. He adds that market participants on the domestic exchange are closely monitoring all news related to the preparation of the state budget for 2009. "We are also tracking macroeconomic indicators to see how much the global crisis is affecting Croatia," emphasizes Korunić.

Prime Minister Ivo Sanader announced yesterday that the government plans to reduce the budget deficit to zero by freezing salaries and cutting infrastructure investments. Consequently, construction stocks were hit hard yesterday. "Certainly, the operations of construction companies will suffer if road construction projects and the construction of the Pelješac Bridge are halted due to budget cuts, as they conduct most of their business in the domestic market," says Korunić. Hina’s survey shows that analysts today expect investor focus primarily on the most liquid issues – shares of T-HT, as well as shipping and construction stocks. (H)