In Focus: Investors in the Shipping and Construction Sector

Analysts today have divided opinions regarding the direction of Crobex on the Zagreb Stock Exchange – some expect its stagnation, while others anticipate a decline, but they agree that the focus of investors will primarily be on the most liquid issues.

Of the eight analysts who participated in Hina’s survey, four expect a decline in Crobex today, three expect stagnation, and one expects an increase. The Crobex index weakened by 0.23 percent yesterday, reaching 1,739 points. The regular trading volume of shares amounted to just over 31 million kuna."I expect stagnation in the domestic market today and a continuation of low trading volumes, as investor interest generally declines as the year comes to a close. Trading could proceed without significant fluctuations in stock prices," says Diana Knezović, a broker and investment advisor at Ilirika Securities. She adds that the most liquid sectors – shipping and construction – could remain the primary focus of investors. The Baltic Dry Index (BDI) for bulk cargo slightly weakened yesterday by 7 points, reaching 829 points.

There are no news to stimulate domestic investors from global exchanges either. On Wall Street, leading indices fell for the second consecutive day on Thursday due to a drop in stock prices in the energy sector, as well as a warning from Standard & Poor’s about a potential downgrade of General Electric’s credit rating. Although this morning the Japanese central bank lowered interest rates to nearly zero, stock prices on Asian exchanges did not rise significantly. The Nikkei index on the Tokyo Stock Exchange fell by 0.9 percent today. In China, Australia, South Korea, and Singapore, leading indices rose this morning, but none by more than 1 percent. "The reduction of interest rates and liquidity injections, as well as the announcement of stimulative fiscal plans, have only a short-term positive effect on global exchanges, after which distrust among investors prevails again," assesses Knezović.

As some analysts in Hina’s survey point out, investors could also be unsettled by the latest economic estimates from the Croatian National Bank (HNB). The HNB has revised its estimate of economic growth in Croatia for 2009 downwards from the previously predicted 2 percent to 1 percent. This year, it estimates that economic growth will slow to 2.5 percent (from 5.6 percent in 2007), that inflation in December compared to the same month last year will fall to 4 percent, and that the average annual inflation rate will be around 6.2 percent. The central bank also estimates that in 2009 it will be very difficult to achieve any real growth in the export of goods and services, that imports could fall by 5 percent, and that the current account deficit, which has increased to 11 percent this year, will be around 9 percent of GDP next year. (H)