Domestic Construction Stocks Under Pressure from Sales

Indices on the Zagreb Stock Exchange may stagnate today, as investors cautiously monitor developments on foreign exchanges and await news from the domestic business sector. All 7 analysts from brokerage firms who participated in the Hina survey expect stagnation of the Crobex today.

The Crobex index strengthened by 0.55 percent last week, reaching 1,753 points, while Crobex10 rose by 1.44 percent to 989 points. Regular trading amounted to 58.5 million kuna, which is approximately 12 million more than the previous week.

-Last week was not bad at all for the domestic market, considering the pronounced negative trends on foreign exchanges. The main loser was the construction sector, while the stock of Leda stands out positively, along with the proposal for the recapitalization of that company-, says Davor Špoljar, senior capital market analyst at Erste&Steiermaerkische Bank.

In the construction sector, a significant price drop of 17.6 percent was recorded for the stock of Dalekovod, with a turnover of 3.1 million kuna, as that company has had its account blocked for some time. -The stocks of other construction companies were also under selling pressure due to poor business performance and high exposure to state contracts, with Ingra’s stock plummeting by 14.4 percent, IGH by 10.9, and Tehnika by 7.8 percent. However, the stock of Viadukt stood out from the entire sector, with a price gain of 4.59 percent, thanks to large booked orders and contracts signed in the last year-, notes Špoljar.

On the other hand, the stock of Leda rose by 13.6 percent last week, reaching 7,030 kuna. The company announced that the General Assembly will be held on December 14, with a proposal to increase the share capital by a maximum of 35,625,000 kuna through the issuance of new shares, priced no lower than 8,000 kuna. The price of Podravka’s stock also rose significantly – by 9.37 percent, to 278.89 kuna.

On foreign exchanges, however, there is a negative sentiment as investors fear cuts in budget expenditures and tax increases in the U.S., which could push the economy there into recession. On Wall Street, the Dow Jones fell by 2.1 percent last week, while the S&P 500 dropped by 2.4, and the Nasdaq index by 2.6 percent. As a result, stock prices on European and Asian exchanges sharply declined last week. This morning, trading is very cautious on those exchanges.

-After elections, there is usually greater volatility in the market. However, this time investors are also concerned about the issue of fiscal consolidation. They fear reduced government spending and higher taxes due to the expiration of benefits from the Bush administration-, emphasizes Špoljar. Therefore, at the beginning of this week, Špoljar expects cautious trading on foreign exchanges, as well as on the domestic market. -I also expect cautious trading on the domestic market, where investors will likely be listening closely to developments on foreign exchanges-, concludes Špoljar.