The Bratislava Stock Exchan-ge had another hard day on September 29 when the official SAX index, which measures the performance of the 16 most heavily capitalised issues on the bourse, plunged below 100 points for the first time ever during continuous trading.
Although the index rebounded slightly before the end of trading and closed at 101.96 points, the latter is still the lowest level in its five year history. The SAX started its existence at 100 points at the beginning of 1993.
The index touched 99.2 points in early activity on September 29, dragged down by the sale of 500 shares of the commercial bank VÚB. VÚB lost 30% of its value during the day's session on the main listed market, closing at 805 crowns per share.
Dealers said they were not surprised to see VÚB fall since the share had been pulled artificially high by some investors who intended to carry out agreed transfers of their holdings at a higher price. Since there was no real demand for VÚB at levels of around 1,000 crowns, where it had been hovering in the recent past, the share found no support when those who were pulling it up completed their operations and stopped supporting it.
Traders said the bourse's development continued to be marked by insignificant foreign investor activities. If foreign investors do anything, they said, it is to sell, but there are rarely any buyers for their Slovak holdings.
Although the victory of combined opposition forces in general elections on September 25 and 26 could generally be considered a positive signal to foreign investors, traders said they appeared to be waiting for the formation of a new government before they place any buy orders.
"We are registering more interest from abroad. But so far, real activity has not improved," said Michal Holík of J&T Securities.
Added Dušan Sýkora, a stock trader at CA IB investment bank:"They [foreign investors] are still waiting to see the formation of a new government. Nothing is certain at the moment so they are not coming yet."
The SAX index has been repeatedly hitting historic lows in the past few weeks, and traders said the market could go even lower in coming days as an inflow of foreign funds was unlikely.
"One thing is uncertainty resulting from the question of how long it would take to form a stable government. The other thing that is keeping foreigners away is strong devaluation expectations. You cannot expect them to hold their funds in Slovak shares, in crowns, when they fear the investment could lose value after a devaluation," said one dealer from a Slovak bank.
Many analysts have said the Slovak crown is likely to be devalued by the end of this year, given the country's large current account deficit and burgeoning foreign trade deficit. The crown has been under strong downward pressure in the past few weeks as local corporate clients purchase hard currencies for crowns while they did not exchange their hard currency earnings.
The crown hit its all time low of 6.7% on the weak side of its plus/minus 7.0% fluctuation band around mark/dollar basket on September 25. It rebounded to minus 6.20 on September 30, but foreign exchange dealers said they expected a further decline given the strong pressure from local clients.