‘Dubai shock’ could shake domestic investors

On the Zagreb Stock Exchange, a negative trend could intensify today, primarily due to bad news from global markets, where stock prices have fallen between 1 and 4 percent this morning due to the ‘Dubai shock’.

Of the 11 analysts from brokerage firms who participated in Hina’s survey, six expect a decline in the Crobex today, three expect an increase, and two expect stagnation. The Crobex index fell by 1.33 percent yesterday, to 2,039 points, the lowest level since September 4. The Crobex10 dropped by 1.77 percent, to 1,075 points. Regular trading in shares amounted to 31.2 million kuna, which is approximately 6.5 million more than the day before. “Today we could see a ‘thicker’ minus in the domestic market, considering the news coming from global markets. Dubai’s debt problems have caused a shock in the markets,” says Maja Bešević, an analyst at the brokerage firm Abacus Brokers.

Asian stock prices sharply fell this morning as the US dollar remains under strong pressure, and investors were prompted to sell shares due to Dubai’s debt problems, which could lead to further losses in the financial system. Investors were already unsettled yesterday on European exchanges by the news that Dubai World, the leading investment state company of the United Arab Emirates, requested a deferral of debt repayments, which amount to 60 billion dollars, until May next year. As a result, concerns about the situation in the global financial system have resurfaced, putting bank stock prices under the greatest pressure.

European stock indices also fell sharply again this morning, and the price of oil dropped sharply, by about five percent, per barrel. Wall Street was closed yesterday due to the holiday, Thanksgiving Day, but US futures indices are already down three percent this morning. “New guidelines for investors on foreign exchanges will also be provided today by ‘Black Friday’, the start of the holiday shopping season in the US. However, it is possible that the mood of investors today will be most influenced by the bad news from Dubai,” assesses Bešević. There are no positive news from the domestic economy either.

“In the domestic economy, the worst is yet to come in 2010, as without a recovery in consumption and production, there will be no improvement in the business results of companies. At the same time, the significant tax burden on personal income, among the highest in Europe, negatively affects personal consumption, which will not be able to be a generator of recovery, nor will the real sector, which is suffocated by illiquidity,” notes Bešević. Among investors in the domestic market, however, there is a sentiment that the worst period has passed, and the Crobex has already been significantly corrected for a longer time, says Bešević. “The biggest problem of the domestic market is its shallowness, which means that it is enough for a larger player to come along and cause a stronger rise or sharper fall in stock prices with their moves,” concludes Bešević.  (H)