The Slovak equity market appears poised for an upturn, although a lack of key foreign participants scared off by the country's murky privatization methods and economic problems may slow its development, analysts claimed.
The Bratislava Stock Exchange (BCPB) has suffered through a dismal summer, with traded volumes of even blue chips growing more meager, while the SAX index has atrophied to 174.47 from a year-high of 208.64 in mid-March. The latest figures show the SAX index at 179.99 (see graph, this page).
But the market showed signs of renewal during the first week of September as prices became too attractive for investors to pass up. The BCPB produced a turnover of more than 1.5 billion crowns in direct trading and the SAX gained some 1.7 percent.
"Theoretically, the market is ready to revive," said Dušan Sýkora of ING Barings in Bratislava. "Demand is meeting bids in a number of shares these days, while the prices are attractively low, which all is very promising."
Traders said their expectations were tempered, however, because any revival of trading on the BCPB floor might last for a month or so, and they don't expect the trading surge to raise turnover or the index to levels seen in previous periods.
Activity on the Slovak equity market ebbed in May, as skyrocketing interbank interest rates caught the eyes of some investors, while others found it too expensive to raise the funds needed to buy shares.
Liquidity on the BSE plummeted afterward, and even the August creation of a new market division aimed at boosting trading activity by separating liquid issues from illiquid ones failed to show any major effect as yet.
Although the direct trade-generated turnover was above average at the beginning of September, less than 40 million crowns worth of deals were made in floor trading through the BCPB's automatic systems.
"One cannot say [trading] is not getting better, but the results still lag considerably behind what we used to call booms in previous years," Libor Briška of Creditanstalt said.
"Foreign investors remain very cautious over the economic development in Slovakia which is preventing them from higher activity," he added.
With a market capitalization of only $900 million, Bratislava's bourse has always stood in the shadows of its bigger neighbors in Prague ($5 billion), Warsaw ($4.6 billion) and Budapest ($3.5 billion).
To make matters worse, investors have been spooked recently by the perceived weakness of the Slovak crown, which has been under constant downward pressure for the past few months.
"A lot of foreign players are still speculating that the crown will devalue and are reluctant to go for significant stock-packages," Briška said.
25. Sep 1997 at 0:00 | Peter Javurek