Upsets in Asian markets depress East Europe bourses
Luli Popescu
BUCHAREST, Jan 17: East European stock exchanges retreated this week, with investors scattering to the sidelines after taking fright from falls at the outset on turbulent Asian markets. But long-term sentiment throughout the region remained positive, with tension in Asia unlikely to drive investors away. All bourses in the region fell, with Ljublana bucking the trend on Thursday, but sliding in line with the others on Friday. World-wide uncertainties triggered falls in Budapest and Zagreb and drove shares in Warsaw and Bratislava to year-lows. Bucharest and Prague also tumbled, but domestic political turmoil also played a role. The Bulgarian Stock Exchange-Sofia launched official floor activity on Monday. The Central European Share Index (CESI), which measures price movements in 72 Hungarian, Polish, Czech, Slovak and Slovenian stocks, slipped 5.8 per cent on Thursday. Friday's close was not immediately available. Czech stocks rallied on Thursday and Friday after falling for eight consecutive days ondomestic political concerns, worries over banking shares and Asia's Financial crisis. The official PX50 index fell 1.51 per cent on the week to Friday to 469.1 points. Dealers expected stagnation in the coming days. "There is a stagnation, the fall has halted, but there is no outlook for significant strengthening," said Ivan Klusacek of Zivnostenska Banka. "For foreign investors... the mood for investing in emerging markets is very cautious." Sentiment was also hit by domestic political uncertainty. Prime minister Josef Tosovsky's government, which said on Monday it wanted early elections in June, must win a vote of confidence in parliament before the end of the month. Banking shares were under pressure on Tuesday and Wednesday as worries mounted about the impact of deeper provisions needed against 1997 earnings. Polish shares fell 2.8 per cent this week, hurt by Monday' six-per cent drop on Asian jitters, but analysts said Friday's rise along with buoyant Asian and European markets suggested Warsaw
would join the uptrend into next week. But they said the nervousness of global investors after recent turmoil on world equity markets might cap Warsaw's growth next week despite the attractive prices for many stocks. "It seems some foreign money has entered the market -- the question is whether it's long- or short-term money," said Mariusz Jagodzinski, an analyst at Kredyt Bank PBI brokerage. Analysts said many institutional investors would remain nervous about a country with a wide current account deficit and listed firms which showed mediocre earnings last year. Hungarian shares fell, failing to recover from Monday's 9 per cent drop triggered by Asian tensions, despite an increase on Friday. Analysts said Hungary, heavily exposed to world market events due to the high proportion of foreign investors, fell in line with the biggest losers. The BUX index closed on Friday 4.54 per cent lower on the week at 7,639.04 points. The Bratislava Stock Exchange seemed unable to shakeoff its New Year
lethargy, with the 16-share SAX index hitting year-lows several Times during the week. The SAX was down 7.39 per cent through the week to Friday at 164.30 points. Trading was very thin and some of the major shares suffered high volatility, mainly due to price speculation. Traders said they saw no sign of stronger foreign demand, indicating little change for the better in the near future. Croatian stocks extended their losses through the week amid concerns over new tax rules that affect securities trade. They were hit again on Thursday, with small investors selling off holdings after a fresh bout of Asian trouble. "Asia seems definitely out this year and we could benefit from that if it weren't for the tax," said one trader with a dominant position. "The problem is that there is still no official explanation so no one wants to do any work." The Crobex index of eight top issues lost 0.24 per cent to 966.3 points on Friday. Slovenia's SBI share index eased 1.06 per cent to 1,412.39 points this week
and traders expected the index to lose further early next week and stabilise afterwards. "The market believes listed companies are undervalued when compared to similar firms in other eastern European countries," one broker said. "That is enough to trigger domestic demand but fast growth cannot be expected without fresh international capital." Bucharest shares sank in low volumes, with the market reeling from the threatened break-up of the government coalition after weeks of political turmoil. Traders said a solution to the political crisis was needed fast to turn upsets on Asian markets to Romania's advantage. The Bucharest Exchange Trading (BET) index, based on 10 leading stocks, plunged 9.76 per cent on the week on Friday. The Bulgarian Stock Exchange-Sofia (BSE) launched official floor trading with only one listed company -- Elcabel cable maker. The exchange had previously traded unlisted securities on its free floor, where only voucher privatisation shares acquired by local privatisation funds
changed hands at prices agreed in advance. It plans to launch operations on two other floors and step up official trade.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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