Will domestic investors decide to capitalize on profits?

After two days of significant stock price increases, today could be very uncertain at the Zagreb Stock Exchange, as some analysts expect that investors may decide to capitalize on profits at some point.

Of the eight analysts from brokerage firms who participated in Hina’s survey, three expect a decline in the Crobex today, three expect an increase, and two expect stagnation. The Crobex index rose by 2.2 percent yesterday, reaching 1,872 points. Regular trading in shares amounted to just over 35 million kuna. "After two days of significant growth in the Crobex, I expect stagnation in the market today, with a slight negative sign, due to possible profit capitalizations. However, due to the increased demand for shares felt in recent days, sharp price corrections downward are unlikely," says Saša Vakula, investment advisor at Argus Securities.

The latest data from the Croatian Financial Services Supervisory Agency (HANFA) indicates a stabilization of the net assets of domestic open-end investment funds in December last year. The value of net assets of 126 open-end investment funds slightly increased – by 0.06 percent compared to November, for the first time since May 2008, amounting to 9.89 billion kuna. "This is a good indicator of market stabilization, which also indicates that the payouts from the domestic fund industry are waning," evaluates Vakula. Bad news continues to arrive from global markets. On Wall Street, stock prices fell significantly on Monday, especially in the financial sector, as investors fear further losses for banks and poor business results from companies in the past quarter. Most Asian markets also recorded losses this morning, led by a nearly 5 percent drop in the Japanese Nikkei index. Investors are cautious because the season for announcing corporate earnings is starting, and expectations are not very encouraging.

Analysts estimate that 500 companies whose stocks are included in the S&P index had 15.1 percent lower profits in the past quarter compared to a year ago, which would mark the sixth consecutive quarter of declining corporate profits. "The last quarter of last year was very turbulent, so investors are eagerly awaiting business reports to see how the crisis has affected companies. This will provide short-term guidance on global markets. If the business results are better than expected, prices will recover; otherwise, a negative trend will prevail," concludes Vakula, adding that very poor expectations have already been factored into stock prices in the domestic market. Hina’s survey shows that analysts still expect the greatest focus of investors on telecommunications, construction, and shipping issues. The Baltic Dry Index (BDI) continued to recover, reaching 889 points yesterday, which is 17 points higher than the day before. (H)