Investors on Annual Leave – Gloom on the Stock Exchange, Awaiting External Catalyst

The shortened work week, poor news from global markets, and lackluster domestic macroeconomic data led investors to be cautious last week, resulting in low trading volume on the Zagreb Stock Exchange, while the Crobex index did not fluctuate significantly.

Last week, the Crobex index weakened by 0.31 percent to 1,941 points, while the Crobex10 strengthened by 0.45 percent to 1,047 points. The regular trading volume amounted to only 33 million kuna, which is half of what it was a week earlier.

“Low trading volume was expected due to the shortened work week because of two public holidays. The lack of corporate news and the anticipation of financial reports for the second quarter have made investors very cautious and uninspired for any stronger positioning. The extremely low liquidity is concerning. When there is no support on the buying side, it is clear that stock prices are gradually sinking,” says Dalibor Balgač, an analyst at the Economic Research Department of Hypo Alpe Adria Bank.

Moreover, the market is not receiving any stimulus from the domestic economy or global markets. The domestic macroeconomic picture remains poor. However, last week the State Bureau of Statistics reported that the unemployment rate fell to 17.2 percent, the lowest level this year, but analysts say this was expected due to seasonal employment.

However, the decline in industrial production in May by 3.4 percent compared to the same period last year was unexpected, indicating weakness in domestic demand. Six macroeconomists who participated in a Hina survey expected, on average, a production decline of 1.9 percent.

“The domestic macroeconomic picture is predictably poor, so it certainly cannot be a market driver. Therefore, the only catalyst can come from abroad, although we recently saw that the optimism in global markets, which lasted about ten days, did not significantly boost the Crobex index,” says Balgač.

Last week, news from global markets indeed could not encourage, as stock prices sharply fell, since all recent macroeconomic data indicate a slowdown in the recovery of the largest global economies. On Wall Street, the Dow Jones index fell by 2.9 percent last week, while the S&P 500 plummeted by 3.6 percent and the Nasdaq index by 3.7 percent. On the exchanges in Frankfurt, London, and Paris, stock prices fell between 2.3 and 4.5 percent.

In this gloom, the highest trading volume on the Zagreb Stock Exchange was achieved by HT shares – 12.4 million kuna. Its price increased by 0.96 percent to 264 kuna. Among the few gainers was the preferred share of the Adris Group, which rose by 5.6 percent, achieving a trading volume of 3.4 million kuna. On the other hand, the price of the regular share of the Adris Group fell by 1.5 percent.

The share of INA also made it to the millionaires list, maintaining its price at 1,709 kuna, while the share of Atlantska Plovidba decreased by 1.62 percent. The share of Ericsson Nikola Tesla also made it to the short list of ‘millionaires’, with its price falling by 0.8 percent.

“Next week, movements in the domestic market will largely depend on trading on the largest global exchanges. A report on employment in the U.S. for May is expected on Wall Street, which usually significantly impacts the markets. These and some other macroeconomic data may provide a clearer picture of the situation in the largest global economies. A slowdown in economic recovery is evident, which the U.S. Fed recently warned about, but I think it is still too early to talk about a double-dip recession, although risks do exist,” concludes Balgač. (H)