Stocks of T-HT and Podravka Stand Out from Anemic Trading

After nearly continuous growth since the beginning of the year, the Crobex index of the Zagreb Stock Exchange was unable to resist negative trends in global markets last week, as it is very vulnerable to external shocks due to low liquidity.

Crobex weakened slightly by 0.12 percent last week, to 2,155 points. However, it is up about 7.5 percent since the beginning of the year. Crobex10, on the other hand, fell by 0.24 percent last week, to 1,132 points. Regular trading in shares amounted to only 81.9 million kuna, which is 35 percent lower than the week before.

"The negative sentiment that prevailed in global markets due to the emergence of two systemic risks also affected the domestic market at the end of last week. This refers to the announcement of a tightening of monetary policy in China and the proposal of a very restrictive law on bank supervision in the USA," says Dalibor Balgač, an analyst in the Economic Research Department of Hypo Alpe Adria Bank. Primarily due to low liquidity, the domestic stock index was unable to withstand the pessimistic atmosphere in foreign markets, adds Balgač.

"Since the beginning of the year, Crobex has recorded a strong jump and has outperformed the DJ Balkan 50 or NTX indices. However, due to very low liquidity in the market, it is very vulnerable to external shocks, such as the latest proposal from the US government for bank supervision," notes Balgač.

In global markets last week, the announcement from the US government about limiting risky trading by banks in securities and the tightening of monetary policy in China caused a sharp decline in stock prices, leading them to fall below levels from the beginning of the year. On Wall Street last week, the Dow Jones index plummeted by 4.1 percent, while the S&P 500 fell by 3.8, and the Nasdaq index by 3.6 percent. As a result, all three indices are in the red compared to the beginning of the year. The Dow Jones and S&P 500 are down by about 2 percent, while the Nasdaq index is down by nearly 3 percent.

European stock prices also sharply fell last week. The London FTSE index weakened by 2.8 percent, marking its largest weekly decline in nearly three months. The Frankfurt DAX index plummeted by 3.1, and the Paris CAC by 3.4 percent.

"I believe that the tightening of monetary policy and the latest proposal from US President Barack Obama will have a short-term impact on investor sentiment in global markets, which continue to be in an upward trend. This is supported by US macroeconomic indicators that consistently point to recovery, except for the unemployment rate," believes Balgač.

The latest Obama proposal related to large financial institutions is still far from realization, emphasizes Balgač. He also assesses that China’s restrictive monetary policy will not yet affect the loose monetary policy of other major global central banks, primarily due to high unemployment rates.

Last week on the Zagreb Stock Exchange, the most liquid stock was T-HT, which achieved a turnover of 18.5 million kuna, and its price slightly weakened by 0.25 percent, to 294.76 kuna. In quite an anemic trading environment last week, the stock of Podravka also stood out, as it was in greater focus for investors due to speculation about a possible takeover of the company by the Atlantic Group. Trading in that stock was suspended from Monday to Wednesday, while Hanfa determined that negotiations for the takeover were not ongoing, so trading in that stock resumed on Thursday. Shortly after the opening of the exchange on Thursday, the price of Podravka jumped by more than 10 percent, leading to trading being blocked again. However, after the unblocking, the price of that stock slid downwards. The week ended with a gain of two percent, at 355 kuna, with a turnover of 7.2 million kuna.

From last week’s economic news, it is noteworthy that the rating agency Standard & Poor’s confirmed Croatia’s long-term "BBB" and short-term "A-3" credit rating, with negative forecasts. Additionally, according to the latest data from the Croatian Bureau of Statistics, industrial production in December last year fell by 5.8 percent compared to the same month in 2008, which is significantly less than expected.

Six macroeconomists who participated in a Hina survey estimated that industrial production in December fell by an average of 7.5 percent. Although these are positive news, they had little impact on trading, primarily due to the negative sentiment spilling over from global markets.

"The further movement of Crobex will be primarily influenced by the movements of blue-chip prices, with a central focus on T-HT," believes Balgač. A sustainable recovery on the domestic stock exchange, however, can only be expected when greater credit activity is initiated in the country, credit prices fall, and domestic macroeconomic indicators begin to show sustainable recovery, notes Balgač. "For now, it is still too early to talk about that," concludes Balgač. (H)