Last week there was a sharp fall at neighboring stock markets triggered by the October 27 fall at the New York Stock Exchange, the largest in its history. The Dow Jones Industrials fell by more than 550 points and lost more than 8 percent of its value. U.S. investors reacted to the bursted bubble on the Asian stock markets, which have been in crisis since the devaluation of the Thai currency. Both European and World markets followed immediately and reported significant losses after the meltdown of the NYSE.
However, the turmoil on international capital markets' did not spill over to Slovakia. On the contrary, the SAX index grew by a slight margin on October 28, the same day stocks in Poland dipped by almost 10 percent, the Hungarian BUX lost 16 percent of its value, and the Russian stock market fell by more than 20 percent.
There is a general trend of investors withdrawing from high-risk emerging markets and redirecting their investments to stable, safe haven assets like U.S. treasury bonds. The Slovak capital market did not react to the turmoil mainly because it already suffered its losses after the currency crisis in late May and also because of the very minute presence of international investors on the market.
Due to the situation on international capital markets and low demand for risky instruments, Slovakia had to postpone its debut Eurobond issue, which is supposed to create a benchmark for the market. Nomura, the lead manager of the issue, decided to wait until the situation stabilized. A similar decision was made by Salomon Brothers, who manages the Eurobond issue for Slovenské elektrárne, expected to enter markets in November. VSŽ, the next in line to issue bonds on the international capital markets, announced that it will soon decide about the lead manager of its debut.
In the meantime, VSŽ announced that its efforts have failed so far to conclude a contract on the purchase of the Hungarian steel producer, DAM Diósgyör, from the Hungarian privatization agency APV. VSŽ insists that DAM's losses that amount to 7.2 billion HUF ($36.5 million) be settled first, which the APV is unable to guarantee.
Later, the Hungarian government announced that it had instructed the APV to hold another tender for sale of the troubled Diósgyöri Steel Works (DAM), which continues to make a loss of 600-700 million HUF each month. VSŽ, rebuffed in its efforts to claim the company, still plans to participate in the second tender.
A Finnish steel maker, Rautaruukki, said that it will establish a joint venture with VSŽ for production of steel roofing in which it will have a 51-percent stake. The new company called Rannilla will attempt to win a strong position on the profiled-steel roofing market in Slovakia and growing Balkan construction markets. VSŽ will supply steel sheets and Rannilla will supply steel construction know-how and marketing network. The company plans to produce 10,000 tons of zinc and plastic profiled products in 1998 and in the next few years it will aim to increase production to 50,000 tons p.a.
Železiarne Podbrezová posted a pre-tax profit of 34.6 million Sk on 2.684 billion sales for the first nine months of this year, compared to 61.8 million Sk of pre-tax profit for the same period last year. Profit was 54 million Sk lower for 1H97. The reasons behind the profit reduction were the electricity price increase (12.9 percent for ŽP) and the reintroduction of the 7 percent import surcharge. Another negative factor was August's repair of technologies.
The company produced 210,000 tons of steel and 110,000 tons of steel pipes this year. About 80 percent of its production is exported. The company management also announced it will pay dividends this year, the first time in the company's history. This year, the company's plan predicts a pre-tax profit of 35 million Sk on sales of 3.363 billion Sk. In 1996, the net income was 22.4 million Sk on 2.974 billion Sk worth of sales.
6. Nov 1997 at 0:00