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CAPITAL MARKETS

The January Effect: a month of poor trading

The new year's trading on the Bratislava Stock Exchange was dominated by the chilling 'January effect', with overall trading very poor. The official SAX stock index oscillated in a narrow range: at the beginning of the year SAX registered at 89.84 and peaked at 92.48, but the month closed at 89.83 points. The most traded issue on the floor was Nafta Gbely, the oil and gas storage company, whose price jumped from 1,400 crowns to 1,500 crowns ($32).
Despite the fact that German-based Westfalische Ferngas, which this year was taken over by RWE, announced a public offer to purchase all tradeable shares of Nafta for 1,444 crowns, the market bid came in at the somewhat higher level of 1,500 crowns.


Ivan Matušek

The new year's trading on the Bratislava Stock Exchange was dominated by the chilling 'January effect', with overall trading very poor. The official SAX stock index oscillated in a narrow range: at the beginning of the year SAX registered at 89.84 and peaked at 92.48, but the month closed at 89.83 points. The most traded issue on the floor was Nafta Gbely, the oil and gas storage company, whose price jumped from 1,400 crowns to 1,500 crowns ($32).

Despite the fact that German-based Westfalische Ferngas, which this year was taken over by RWE, announced a public offer to purchase all tradeable shares of Nafta for 1,444 crowns, the market bid came in at the somewhat higher level of 1,500 crowns. Westfalische has so far already bought over 37% of Nafta shares, and has thus gained a blocking minority stake.

Slovak oil refinery Slovnaft, one of the market's blue chips, was traded very quietly. Bids for Slovnaft moved from around 500 to 519 crowns, and the switching of FNM privatisation agency bonds for Slovnaft shares, conducted by the FNM last year, was not concluded successfully. Based on this the FNM has decided to sell its 7.98% stake in Slovnaft.

This sale should be coordinated with the sale of the 4.5% stake in Slovnaft held by gas utility Slovenský plynárenský priemysel (SPP). It seems to be a good strategy to offer a cumulative stake of 12.48% of Slovnaft share capital instead of a separate sale, which could lower the price each stake could fetch. Moreover, Slovnaft expects a good profit for 2000, and for the first nine months of 2000 reported a profit of 781.9 million crowns, far better than last year's loss of 2.48 billion crowns ($53 million).

Steel maker VSŽ in January traded unchanged at 150 crowns.

The Slovak banking sector, which is closely watched by foreign financial institutions and by the government, performed very well. Všeobecná úverová banka (VÚB) bank, which is close to concluding the sale of a 68% government share, attracted bullish sentiment in several sessions.

Two institutional bidders, the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC), which should together gain 25% of VÚB shares, are so far interested in the bank, and on February 5 the state put advertisements in international magazines inviting bids for the bank.

VÚB share prices within the month soared to a one-year high of 790 crowns. At the end of January VÚB saw a small correction to 765 crowns, but there seems to be strong potential for a rise.

Another bank traded on the BSE floor, Investičná a rozvojová banka (IRB), which is also seeking a foreign investor, added only 15 crowns and closed the month at 220. The pharmaceutical sector, represented chiefly by Slovakofarma, saw mixed trading, but managed to push up somewhat and touch December levels, with the firm creeping up to 1,450 to 1,500 crowns.

The biggest Slovak monopoly insurer, Slovenská Poisťovňa, was not traded and its last price was at 980 crowns. However, a direct transaction pushed things up to a higher price, around 1,400 crowns. SP has taken its first tentative steps toward privatisation and in December published a tender for a financial advisor for the sale of a 78.5% stake in the firm. The major shareholders in SP are the FNM with 21.4% and the Finance Ministry with 57.1%. The privatisation process should coincide with the loss of its monopoly on car insurance, and SP has already chosen seven potential advisors for the sale.

At the beginning of this year the government also launched a programme to pay back the 100 billion ($2.17 billion) crown cost of restructuring the Slovak banking sector by issuing 101 billion crowns in restructuring bonds directly into the books of three Slovak banks.

The entire placement is scheduled for January and March. In January over 83 billion crowns was placed in restructuring bonds, and in March the remaining 18 billion will be offered. The biggest portion, 63.2 billion crowns, will be put into the books of VÚB, with Slovenská sporiteľňa, the country's largest bank, getting 32.4 billion crowns, followed by IRB with 6.4 billion crowns.

These bonds are being issued in order to replace the bad loan portfolios of the three Slovak banks with bonds guaranteed by the Slovak government. There are two types of bonds with different maturities. The first kind of bonds have a floating coupon which bear a six month BRIBOR calculated for the last three months, and maturity set at seven and ten years. The second type carries a fixed coupon set at 8%, payable bi-annually, and a maturity of five years.

Ivan Matušek works in the Sales and Trading Department of Slávia Capital brokerage house. Questions and comments can be sent to imatusek@slavia.sk

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