Investors Need to Be Cautious as Markets Appear Overbought

Calm trading is expected on the Zagreb Stock Exchange as there are still no news that could trigger the market, and investors may once again focus on the shares of Ericsson Nikola Tesla, which today still carries the right to dividend payment for the previous year.

All 7 analysts from brokerage firms who participated in the Hina survey expect stagnation of the Crobex today. The Crobex index weakened by 0.04 percent yesterday, to 1,925 points, while Crobex10 fell by 0.25 percent, to 1,087 points.

Regular trading volume amounted to 8.7 million kuna, which is approximately 2 million less than the day before.

The highest turnover was achieved by HT shares, with 3.3 million kuna, and its price strengthened by 0.55 percent, to 209.99 kuna.

There was also significant trading in the shares of Ericsson Nikola Tesla, which recorded a turnover of 1.17 million kuna, while its price weakened by 0.33 percent, to 1,514 kuna.

-Crobex indices ended trading yesterday with mixed signs, with somewhat lower turnover than the day before. There were no significant corporate news, and more than half of the turnover was achieved by HT and Ericsson Nikola Tesla shares. I expect similar trading today as there are no strong catalysts to trigger market growth, says Tamas Nagy, a broker at Erste&Steiermaerkische Bank.

As he adds, the shares of Ericsson Nikola Tesla could again be in greater focus for investors, as today is the last day to purchase them to participate in the dividend payment of 170 kuna per share, with the ex-dividend day occurring tomorrow.

On foreign exchanges, however, a positive sentiment prevails. On Wall Street, the Dow Jones and S&P 500 indices reached new record levels on Wednesday, as signs of weakness in the U.S. economy, along with low inflation data, strengthened the belief that the Fed will continue to pursue a loose monetary policy.

The Dow Jones strengthened by 0.40 percent, to 15,275 points, while the S&P 500 rose by 0.51 percent, to 1,658 points, and the Nasdaq index increased by 0.26 percent, to 3,471 points, the highest level since November 2000.

In most Asian and European exchanges, stock prices rose this morning, as investors were encouraged by the growth of the Japanese economy.

-Positive sentiment continues to prevail on foreign exchanges, despite somewhat worse macroeconomic indicators from the Eurozone, primarily regarding the decline in GDP and the weakening of industrial production in the U.S. So far, the unwritten stock market rule ‘sell in May and go away’ is not being realized, says Nagy.

At the beginning of the year, stock prices usually rise, followed by a correction downwards in May as the summer season approaches, when markets typically experience a lull. However, this May is unusual, as investors are not retreating from the market. On the contrary, stock prices continue to rise.

Nevertheless, Nagy notes that investors need to be cautious as markets appear overbought.

-Although the overall picture of the market remains positive, caution is warranted as minor corrections are possible, concludes Nagy.