No significant impact of presidential elections on the market is expected

Primarily due to optimism in European markets, a positive sentiment is expected this morning on the Zagreb Stock Exchange, but also low liquidity, while the presidential elections should not significantly affect the market.

Of the nine analysts from brokerage firms who participated in Hina’s survey, five expect an increase in Crobex today, two expect stagnation, and the same number expect a decline. The Crobex index dipped early last week near 1,900 points, but then recovered, closing the week with a gain of 0.53 percent, at 1,987 points. Since the beginning of the year, Crobex has gained 15.4 percent. The regular turnover of shares in the previous shortened working week amounted to around 83 million kuna, which is seven million less than a week earlier. Crobex10 rose by 0.62 percent, to 1,053 points.

"Last week, investors on the domestic market will remember for very low liquidity, with the lowest daily turnover recorded on Christmas Eve in the last few years, just over four million kuna," says Žaran Perić, investment advisor at the brokerage firm EA Sistem. While Crobex recorded only minimal weekly growth, the most important global stock indices rose sharply, reaching their highest levels this year. On Wall Street last week, the Dow Jones index rose by 1.9 percent, to 10,520 points, the highest level in the last 14 months. The S&P 500 index strengthened by 2.2 percent, while the Nasdaq index jumped 3.4 percent, to 2,285 points, the highest level in 15 months.

European stock prices also rose last week. The London FTSE index jumped 3.9 percent, reaching its highest level in the last 15 months. The Paris CAC index strengthened by 3.1 percent, while the Frankfurt DAX rose by 2.1 percent. Since the beginning of the year, the New York Dow Jones has gained 19.9 percent, and the S&P index even 24.7 percent. "Crobex, on the other hand, has gained only 15 percent since the beginning of the year, and the reason for such a large difference compared to the most important global indices can be found in domestic macroeconomic data and the current situation of the Croatian economy," says Perić.

While the largest global economies have recorded a recovery, the sharp decline in domestic GDP, constant growth in unemployment, and a decline in industrial production, along with other data, have pushed investors away from the stock market, notes Perić. "We can expect their return only when indicators begin to show signs of recovery. And although domestic macroeconomists and analysts have announced that we are facing another difficult year, I believe that the worst is behind us and that we can hope for a recovery of the domestic economy at least in the second half of next year," says Perić. In the meantime, last week’s optimism in foreign markets continues this morning in European markets.

"I hope that the optimism in European markets will be sufficient for today’s minimal growth of Crobex and its re-breaking of the 2,000-point barrier," emphasizes Perić. Perić does not expect a significant impact from yesterday’s first round of presidential elections in the country on the market. "Although presidential elections usually affect market movements, due to the overall environment, a significant reaction from investors is not expected, so I also expect a continuation of low liquidity on the domestic stock exchange today," concludes Perić. From domestic macroeconomic data, the second estimate of gross domestic product in the third quarter is expected today.

According to the first estimate from the State Bureau of Statistics, domestic GDP fell by 5.8 percent in the third quarter compared to the same period last year. This is a milder decline than in the first and second quarters, when it was 6.7 and 6.3 percent, respectively. The slowdown in the decline of the economy is expected, so in Hina’s survey, nine analysts estimated that GDP decreased by 5.5 percent on average. The second GDP estimate may differ from the first, so the decline in the economy may be greater or smaller than what was published a month ago.  (H)