After a 9 Percent Jump, Stagnation of Crobex is Expected

After the Crobex jumped more than 9 percent since the beginning of the week, today most analysts on the Zagreb Stock Exchange expect price stagnation, especially due to the fact that trading volumes remain low and there is no significant strength on the buying side.

Out of nine analysts from brokerage firms, seven expect stagnation today, while two anticipate a continuation of Crobex’s growth. The Crobex index rose by 2.39 percent yesterday, reaching 1,705 points. The regular trading volume amounted to 38.6 million kuna."After the Crobex increased by slightly more than 9 percent since the end of last week, it is possible that today will see stagnation in the market. The previous rise in stock prices was achieved on low trading volumes, indicating that there is still no significant strength on the buying side," says Zvonimir Marić, a member of the Management Board of K.D. Asset Management.

The latest data from HANFA on the decline of net assets of open investment funds in Croatia in November by 1.3 billion kuna, to 9.88 billion, is largely in line with market expectations, says Marić. "With the continued decline in the assets of investment funds, and the engagement of pension funds in financing the state through investments in treasury bills, there is no real financial strength that could stimulate a market recovery," notes Marić.

However, he adds that stock prices are undervalued relative to the current fundamentals of companies, even in relation to the expected slowdown in their business next year. On Wall Street, leading indices rose about one percent on Wednesday, thanks to the increase in stock prices in the energy sector, but trading was cautious as companies continue to warn of worsening business conditions. Leading indices on Asian stock exchanges, on the other hand, did not experience significant fluctuations this morning as investors find no reason to buy stocks, given the continued stream of news about the strengthening recession in the global economy.

However, on Asian exchanges, shares of shipping companies continued to strengthen, as investors hope that the economic stimulus measures and infrastructure projects announced by governments around the world will increase demand for shipping. The Baltic Dry Index (BDI) continued to rise yesterday, increasing by 12 points to 691 points. Some analysts in Hina’s survey also highlight that they expect trading to proceed in anticipation of the unemployment data in the U.S. for the past week, which could signal whether the recession is deepening. Economists expect the number of newly unemployed to reach 525,000, after 509,000 recorded the previous week.

As Marić points out, investors are increasingly focusing on issues of refinancing corporate debts in the coming year, financing new projects, problems with collecting payments for already completed jobs due to rising illiquidity in the country, as well as their earnings in conditions where interest rates are expected to rise. "These issues cannot be quantified, and therefore investors remain very cautious regarding investments in stocks," concludes Marić. (H)