The Trust of Domestic Investors Erodes Due to the Greek Debt Drama

After the Crobex index fell to its lowest level since early January yesterday, unstable trading is expected today on the Zagreb Stock Exchange as there are no domestic news to encourage investors, and fear of the debt crisis spreading beyond Greece continues to prevail on global markets.

Of the 11 analysts from brokerage firms who participated in the Hina survey, five expect a continuation of the Crobex decline today, while six expect stagnation. The Crobex index weakened by 1.3 percent yesterday, to 2,100 points, the lowest level since January 8. Over the past seven days, it has plunged 5.2 percent, marking its longest negative streak since October 2007. The Crobex10 fell by 1.29 percent yesterday, to 1,132 points. Regular trading in shares amounted to 20.3 million kuna, which is about one million kuna more than the day before.

“Share prices have now been significantly corrected downward on both domestic and global markets, but their further direction will depend on the influx of new news regarding the debt crisis in the eurozone. Investors are closely monitoring what will happen with Greece and potentially other eurozone economies burdened by large debts,” says Zvonimir Marić, a member of the Management Board of K.D. Asset Management. If there are no new bad news from the world, Crobex could stagnate today, Marić believes.

On global markets, investor confidence continues to be eroded by the Greek debt drama. On Wall Street, stock prices fell for the second consecutive day on Wednesday. European leaders warned yesterday that the debt crisis could spread beyond Greece’s borders, and Moody’s Investors Service announced the possibility of a credit rating downgrade for Portugal. Stock prices on Asian markets sharply fell this morning, and trading on European markets started with losses, while the euro exchange rate, for the first time in 14 months, dipped below the level of 1.28 dollars.

In addition to the debt crisis, domestic news will also be in focus for investors, says Marić. Today, the government is expected to announce a proposal for amendments to income tax regulations, aimed at reducing the tax burden on employee wages and stimulating consumption. Among the domestic news, a press conference by Japan Tobacco International, the third-largest tobacco company in the world, regarding its entry into the Croatian market stands out, which could strengthen competition in the tobacco market currently dominated by Adris. Investors will be keenly watching announcements from Japan Tobacco, Marić notes. Končar Elektroindustrija, on the other hand, has announced a call for the General Assembly on June 15, where shareholders will decide, among other things, on the inclusion of the company’s shares in the Official Market of the Zagreb Stock Exchange.

“This is positive news, as it will affect the improvement of liquidity of that stock in the market. However, with everything coming from global markets, I think investors are unlikely to react significantly to this news today,” says Marić. Some analysts in Hina’s survey also point out that the shares of Belje could come under pressure following the decision of the Croatian Privatization Fund to sell 15.37 percent of Belje shares to employees at a price of 30 kuna per share. Just over 2,000 Belje workers could buy 626 shares in this case, and that package would cost them 18,780 kuna. Yesterday, the last price of Belje shares on the stock exchange was 79 kuna. If the decline of Crobex continues, the technical picture of the market shows that it could find its first support at 2,060 points.

“With yesterday’s decline, the Crobex index broke the support line at 2,112 points, as well as the support trend line from July to December last year. All targets we set last week have been met, including yesterday’s drop to 2,100 points, and at one point to 2,095 points. The market closed with Crobex slightly below the 200-day moving average (SMA200). At this moment, we cannot seek the first support at the price but at the 23.6 percent Fibonacci retracement of the rise from March to October last year, which is around 2,060 points, and the second is found at the horizontal support of 2,018 points. Crobex is in a seven-day negative streak after which a reaction is normally expected. The 50-day (currently at 2,150 points) and 100-day moving averages (currently at 2,132 points) have been broken this week, so in the event of a reversal, they represent the first resistances,” says Srećko Fodrek, head of the Securities Trading Department at Finesa Capital. (H)