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Dec 12, 2017 19:21 EEST
December 12 (SeeNews) - The main domestic process that will influence Croatia's capital market next year will be the unravelling of the situation in Agrokor, after the market suffered strongly from the financial downfall of the concern in 2017, an analyst with Croatia's Erste told SeeNews on Tuesday.
The deep financial trouble, in which Croatia's largest privately held company found itself in early 2017, has been a great burden for domestic stocks, Davor Spoljar said in response to a SeeNews inquiry.
“The domestic capital market started to recover more seriously at the beginning of 2016, due to a turnaround in the economic cycle, but this short positive trend was interrupted by the developments in Agrokor in early 2017,” Spoljar explained.
On March 29, in the early days of the crisis in Agrokor, the 25-share benchmark CROBEX index of the Zagreb Stock Exchange fell by 2.98% to 2,015.12 points, while the CROBEX10 decreased 2.72% to 1,156.26 points. Both indices were slowly gaining ground through 2016, and then reached their peak in early 2017 before falling when Agrokor crisis struck.
At the time, it was the shares of Agrokor listed subsidiaries that bore the brunt of the crisis but the negative sentiment soon spilled over to the rest of the market, especially to key suppliers.
"Investors are concerned about the impact future events in Agrokor may have on the Croatian economy and the key companies exposed to the concern," Spoljar told SeeNews at the time.
By December 11, the CROBEX stood at 1,854.45 points, while the CROBEX10 came in at 1,086.29 points.
Spoljar explained on Tuesday that if the restructuring of the ailing concern untangles without any major disturbances and if certain companies within the Agrokor Group are put on sale, Erste foresees that the Zagreb bourse could bounce back in 2018.
“We believe that there will be interested investors and that the market will react positively to such developments,” he said.
Spoljar also said that many Croatian firms could be in the running for Agrokor’s flagship companies in 2018.
“Many domestic companies could also be interested in Agrokor's flagships companies or in those rocked by the developments in the concern”, he added.
Aside from Agrokor, macroeconomic data will be a tailwind for the Croatian stock market next year, as will be the strong tourism figures which are expected to continue, Spoljar opined.
Agrokor's financial troubles became apparent earlier this year when Moody's downgraded its corporate family rating (CFR) to B3 from B2. The company then pulled out of a syndicated loan deal it had struck with several international lenders, which sent the price of its bonds on international markets into a downward spiral.
In April, the Croatian parliament adopted a law allowing the government to appoint temporary administrators in companies of systemic importance to lead a restructuring process at the request of the companies' creditors or the debtors themselves. A process of restructuring of the indebted concern under extraordinary administration was launched under the law commonly known as Lex Agrokor.
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