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CAPITAL MARKET REPORT

VSŽ stabilizes as SAX index cools off

The Slovak capital market experienced lower trading volumes and a slight decline in the SAX index during the second half of June. VSŽ stock became volatile after passing the 700 Sk mark, but has since stabilized at a price of 680-90 Sk per share. It is possible then that after the decline, there will be an upward movement in the share price, supported by recent events in the company. The VSŽ Supervisory Board accepted the resignations of two VSŽ Board members who were replaced by three members: Július Rezeš (26 years old, former VSŽ finance director and the son of Transportation Minister Alexander Rezeš); Anton Jura (30, former director at VSŽ Keramika); and Ján Seňo (27, former director of ZOS). VSŽ President Ján Smerek described the changes as strategic.

The Slovak capital market experienced lower trading volumes and a slight decline in the SAX index during the second half of June. VSŽ stock became volatile after passing the 700 Sk mark, but has since stabilized at a price of 680-90 Sk per share.

It is possible then that after the decline, there will be an upward movement in the share price, supported by recent events in the company. The VSŽ Supervisory Board accepted the resignations of two VSŽ Board members who were replaced by three members: Július Rezeš (26 years old, former VSŽ finance director and the son of Transportation Minister Alexander Rezeš); Anton Jura (30, former director at VSŽ Keramika); and Ján Seňo (27, former director of ZOS). VSŽ President Ján Smerek described the changes as strategic. We suppose that the Rezeš group has strengthened its position by this move. Moreover, the company ARDS, which is owned by VSŽ management, has become the new owner of a 17.9% stake of Slovenská Poisťovňa. VSŽ also controls the daily newspaper Národná obroda (See OMRI briefs, page 2).

There were moderate increases in the prices of financial institutions on the BSE floor. VÚB jumped over the 1,400 Sk mark, IRB also reached 1,400 Sk and Slovenská Poisťovňa again tried to break through the 2,000 Sk barrier. The OTC market reported the transfer of 478,655 Železiarne Podbrezová shares (20% of shareholder equity) at prices between 300 Sk and 412 Sk per share. Intensive floor trading of this share caused the price to surge to 422 Sk. This indicates that the company's take-over may be in full swing. The market also experienced continued strong demand in the shares of privatization funds. Takeover activities in general are pushing prices up.

Two large investment funds remaining from the era of coupon privatization, Ferrofond IF and IPF II VSŽ- Sporiteľňa, have been transformed recently into holding companies. They intend to act not only as institutional investors, but also as strategic investors in companies. Ferrofond IF was renamed Eurotrade, a.s. and will be controlled by VSŽ. IPF II VSŽ- Sporiteľňa will remain a member of Cassoviainvest Group. We expect more such transformations to be made.

Prepared by ING Bank N.V., Bratislava branch in cooperation with ING Baring Securities (Slovakia), o.c.p.,a.s.

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