Archive of articles - July 1998, page 2

Bad loans haunt big Slovak banks

While in the Czech Republic, bad loans are evenly spread between the big socialist-era banks and young upstarts privately founded after 1989, Slovak banks' lending performance tends to fluctuate wildly.On the one hand there is the refined, swift performance of banks like Tatra Banka. Founded in 1991 , the Tatra Banks is now the third largest domestic bank, as ranked by the total of its assets last year, while only 1.4% of its loans are labelled as non-performing. On the other hand, socialist-era behemoths like VÚB, IRB and SLSP are all mired in bad debts.But these banks' credit troubles are linked to the past as much, if not more, to present activities, some say.

Fake brands tackled by new marketplace law

Although international clothing giants are increasingly opening their businesses in Slovakia, the local market is still overwhelmed by a huge number of fake brands.The new Act on Market Stands was supposed to wipe these pirated brands out of sight through restricting the number of goods that are allowed to be sold, but sellers are not willing to give up easily.Bratislava's biggest outdoor market, on Miletičova ulica, used to harbor 161 stands. Since July 1, this number has dwindled to 106. "Sales of all consumer goods have been temporarily stopped at the stands for now," said Viera Obrcianová of the local administrative office in Bratislava's Ružinov district. "The new law gives permission only to sellers with permanent stands. Because of that, the Miletičova market area will be able to accommodate only one-third of all previous sellers."

Constitutional crisis grows clearer as elections approach

While to many political experts the Slovak Parliament's failure for the ninth time to elect a President means it is almost certain that the country's leadership deadlock will continue until September's national elections, two ruling coalition parties don't seem to be listening to the pessimistic vibes.The two parties - the Slovak National Party (SNS) and the Movement for a Democratic Slovakia (HZDS) - have submitted constitutional amendments in an attempt to force a successor as president, but legal experts claim that neither idea really solves the problem.

Around Slovakia

Explosion kills two, injures a journalistOlympic airplane christenedMarijuana farmer bustedSalmonella infects almost 300

Market dead despite continued economic growth

During the two week period ending July 8, the market saw a paltry gain of 3.1% as the SAX climbed to 111.25 on the last day of the period on the back of steel and financial industry stocks' appreciation.On the other hand, Slovakofarma's share price remained flat and our most favorite stock, Slovnaft, experienced a 6.2% decline to close at 610 Sk.We maintain that the current market valuation is very low compared to market fundamentals and is caused by overly negative market sentiment induced by pre-election uncertainty. While we see a possibility for a partial appreciation of certain blue-chip stocks before the September election, as foreign investors may realize the severe undervaluation of some stocks, we do not believe that the market could see an across-the-board recovery prior to the elections.

New business center to offer top-quality office space, air conditioning, express elevators

The Bratislava Business Center (BBC), which opened its doors in January 1997 is expected to expand by September 1999, when it will finish a third wing and offer a total of 24,720 m2 of what its planners are saying is luxurious office and retail space.The BBC III project began last March as part of two phases. The first was the reconstruction of the already existing two-wing building on Prievozská ulica. That reconstruction, expected to be finished this September, will provide 3,140 m2 of space. The second stage involving the construction of the third wing was started in May 1998 and is expected to be completed by September 1999. The addition will add another 21,580 m2, increasing the overall space of the BBC to 45,000 m2.

More may not mean merrier in the world of Slovak fashion

Just as every country has its typical dish or a famous place to visit, it also has a specific taste in fashion in the way people dress for a business meeting, for a chat at a downtown café or to spend a night at the opera.As a result of observing diverse ethnic groups that populate Slovakia, experts and designers say Slovaks have motley tastes when it comes to fashion. At times, while walking down the street, one has to turn around to check if what they have just seen was only a nightmare, only to spot, twenty seconds later, a real gem as if it were just clipped out of a top fashion magazine.

Lufthansa views its future in Slovakia with optimism

Last year's privatization of the German airliner Lufthansa resulted not only in its best economic performance ever, but also in growing interest to expand its operations. Although the ownership change did not have an overwhelming impact on Lufthansa's Slovak customers, company officials are convinced that the Slovak market does have strong growth potential."It's surprising how large the potential increase could be for Slovakia's market," said Jochen Korbmann, Director of Lufthansa for the Czech and Slovak Republics, at a June 18 media briefing in Bratislava. "Slovakia exceeds Czech, Polish and Hungarian markets in its potential to increase."The number of tickets sold in the first quarter of this year for scheduled airline traffic in the Czech Republic grew by 13% compared to the same period last year. According to Korbmann, this was a "surprising increase," but he added that it was still well behind Slovakia's growth of 25%. The number is even more impressive given the fact that Slovak Lufthansa passengers don't fly to and from Bratislava, but Vienna or Budapest.

Crown remains volatile while bond yields keep falling

The Slovak crown experienced a period of relatively high volatility over the two weeks ending July 10. The currency appreciated sharply against its mark/dollar basket in the week ending July 3, driven up mostly by the firming Czech crown and expectations of a large conversion from hard currencies to crowns by one corporate client.After opening on June 29 at around 3.0% on the depreciation side of the fluctuation band, the crown gradually strengthened on the heels of the Czech currency firming and banks' building short positions in hard currencies in an expectation of hard currency inflow to its strongest level of minus 2.10% against the parity on July 8. Foreign investors' activity remained very low and their exposure to the Slovak crown was still insignificant.

Eye on Vienna

NBS sees room for lower long rates

State bonds' auctions for 3Q98

The Finance Ministry released a timetable of state bond auctions to be held in the third quarter of 1998. The ministry does not set the total amount of state securities it plans to offer at its auctions, nor does it set a maximum or minimum price limit on bids. All auctions will be held by the National Bank of Slovakia (NBS). Unlike the previous two quarters, the ministry will only sell state bonds and does not plan to sell any T-bills, the NBS announced.

What's Happening in Bratislava

Mečiar: 4 banks should merge

U.S. State Department critical of new election law; Agency claims is inconsistent with international norms; urges Slovaks to invite international election observers

The Government of Slovakia has passed a law that may result in an election process inconsistent with current international norms, thus not free and fair. Independent experts from the U.S. and elsewhere, including the OSCE (Organisation for Security and Cooperation in Europe), had advised the government of their specific concerns while there was still ample time to bring the legislation into line with international norms. As enacted, the legislation increases the authority of the Ministry of Interior, which was instrumental in disrupting last year's referendum on NATO membership and direct election of the President. The legislation also increases the possibility that media coverage of the election will be unfairly and excessively restricted. Significantly changing the election process only four months before voting creates confusion, and calls into question the intent of the legislation.

Czech Social Democrats win, tough bargaining ahead

PRAGUE - Tired of grafted, broken promises and elitist arrogance, nearly 6 million Czechs who turned out for the June 19-20 Parliamentary elections were supposed to blow a big fat raspberry at Central Europe's last undefeated post-communist right wing regime.But they obviously hadn't read the script. Instead, voters confounded pre-election opinion polls by appearing to support another version of the center-right group, that had collapsed seven months ago following a string of corruption scandals.Although the Social Democrats (ČSSD) garnered the most votes with 32.3% - nearly 5 percentage points more than their bitter rivals, Václav Klaus's Civic Democratic Party (ODS, 27.7% of the overall vote) - observers fear that ČSSD leader Miloš Zeman will be unable to find enough partners to form a stable government.

Slovak crown weakens, further drop predicted

The Slovak crown continued its poor performance during the two-week period ending June 26 as regional problems continued to drive the currency down. The Czech crown's weakness on the back of local speculative moves has dragged its Slovak counterpart lower. On June 11, the Slovak crown broke the 2% margin on the weaker side of the fluctuation band, and it continued to slide towards the 3% level, which was first tested on June 15. This level was widely believed to be a quite good support level for the crown, later proved as the fall halted at 3%. Part of the support stems from some market players fearing that the National Bank of Slovakia (NBS) may intervene anywhere beyond this level. However, the crown tested the 3% level several times during the week ending June 19, on which day we saw it slip to a low of 3.3% on the weaker side of the band.

Economy plunges as government ponders bank mergers

Market sentiment saw no change during the two-week period ending June 25. The SAX index fell further, reaching 107.86 on the back of thin trading and plummeting prices of major blue-chips. During this time period, only Figaro and VÚB appreciated in value by 26.9% and 20.3%, respectively. On the other hand, Slovakofarma dropped by 16.3% to 3,350 Sk. In this respect, we recommend that investors carefully watch announcements regarding the launch of Slovakofarma's new cholesterol-reducing product, or intensifying of expectations for a crown depreciation, as both events should benefit the company's bottom line and consequently the share price.

Controversial gas station endorsed

After a dragged-out dispute fuelled by intense campaigning, local residents and Aral Slovakia finally reached a compromise over the construction of a new gas station in Bratislava's Patrónka district, now set to start on June 15."We actually lost by this compromise," said Kamil Procházka, President of the Horský Park Foundation that led the citizens' protest. "I understand Aral's perspective when I consider the business's objectives. But where the environment is concerned, it is not very positive."What may seem as a loss to the environmentalists was a victory for the gas station chain. Although Aral officials refused to comment on the matter, Bratislava's City Hall said it did not view the project as environmentally harmful.