BELGRADE (Serbia), September 25 (SeeNews) – The small capital markets of Balkan neighbours Serbia, Bosnia and Montenegro promise to gain more ground until the end of 2009 as optimistic foreign investors look back at the emerging stockmarkets seeking bigger returns, market watchers said.
“I definitely expect that indices will end the year higher, both on global level and here,” Aleksandar Malisic, head of the Serbian unit of Raiffeisenbank's investment department, told SeeNews.
“When volumes on global markets start decreasing, the money will come to underdeveloped markets,” Malisic said.
Although investors’ lethargy is typical for the summer season, the share indices on the tiny Montenegrin capital market jumped considerably after sinking to historic lows in the spring, lifted by the sale of a state-owned stake in power utility EPCG.
“A significant amount of money is expected to reach small shareholders following this partial privatisation”, Ivan Joksimovic, a broker at Podgorica-based brokerage VIP Broker, told SeeNews.
The Moste index of the Montenegro Stock Exchange has soared 103% since the beginning of the year, while the NEX20 index of the country’s other bourse, NEX Montenegro, has jumped 86%.
Italy’s A2A paid 192 million euro for 18.3% of EPCG earlier this week and is expected to pay another 100 million euro for a further 13.64% of EPCG next week, local media reported.
A part of the minority shareholders’ earnings will probably return to the Montenegrin capital market and will further lift prices, which are still low, Joksimovic said.
“As a result, I expect a positive trend in all segments of the two Montenegrin bourses at the end of the year.”
Joksimovic added that besides the EPCG stock the shares of Crnogorski Telekom, wine maker Plantaze, port operator Luka Bar and aluminium smelter KAP will be among the most attractive ones.
EVIDENT RECOVERY
In Belgrade, the blue-chip BELEX15 index has added 53% since January.
“After the lowest-ever level, which the market reached in the middle of March, the recovery is evident not only in the price rises but also in the increased turnover and the number of transactions,” Uros Spasenovic, a broker at Belgrade Independent brokerage house, told SeeNews.
“The vital thing is volumes to keep increasing and indices to rise in healthy growth,” Raiffeisenbank’s Malisic said. “If not, you could get stuck in the Serbian market with 10,000 euro, without being able to exit for a whole month, with this, of course, depending on the share.”
After Belgrade's benchmark share index dropped 76% last year and trading volumes melted, many Serbian brokerage houses struggled to cover daily costs and finally had to close their businesses earlier this year.
“Some brokerage houses that are facing closure are now repenting they couldn’t endure,” Malisic said, adding this is a sure sign the positive sentiment has returned to Belgrade.
“This is pretty nice. Even some foreigners, who earlier were about to exit their positions and got stuck in a dead-end street for over a month, now have the chance but don’t want to sell these shares. Even the local investors, who had focused more on foreign shares, have now started looking back at the Serbian market. The local sentiment is far more positive than it used to be,” Malisic said.
Spasenovic said Serbian firms still lack corporate culture, especially when reporting financial results and business plans, so it is often hard for an investor to estimate the company's current financial state. Faced with inadequate financial information about the company, investors in its shares automatically turn their eyes to global markets for direction and this is one of the reasons why developments on world markets quickly leak to the Belgrade bourse.
Malisic said as far as the companies’ fundamentals are concerned, they will be much worse in the second half of 2009.
“In Serbia they will be negative compared to a year ago, unlike in Europe, where they will be positive. How strange the Belgrade bourse is – fundamentals do not impact the firms’ results on the bourse at all. Fundamentals do play a role but on smaller markets like the Serbian one the biggest catalyst is the global development of affairs,” Malisic said.
The surge in the stock indices in Serbia and especially in Montenegro since January make the performance of the two Bosnian bourses look humble. The benchmark BIRS index of Bosnia’s Banja Luka Stock Exchange has added just 2.4% since January, while the SASX10 blue-chip index of Bosnia’s Sarajevo Stock Exchange has dropped by 1.9%.
HOPES RISING FOR MARKET REVIVAL
“Our expectations for the end of the year are positive and we hope the [Bosnian] market will get more and more liquid and turnover will rise,” Dzevad Begic of Sarajevo-based brokerage Fima Int. told SeeNews. “We also expect the entry of foreign investors as this is the true moment for a good buy of the most liquid shares."
He added Bosnian investment funds, which emerged during the privatisation of key state-owned assets, had to part with their ownership of some of the most liquid shares in Sarajevo like power utility Elektroprivreda BiH, BH Telecom and drug firm Bosnalijek, because local legislation bans investment funds from investing more than 15% of their total assets in a single stock.
“The funds are now complying with legislation and trading in these shares is decreasing, so I expect their prices will rise in the coming months,” Begic said.
He added another reason for optimism is the anticipated launch of secondary trading in bonds on the Sarajevo bourse. Trading in government, municipal and corporate bonds makes up some 60% of total turnover on the Banja Luka Stock Exchange, which is why these securities are expected to raise the turnover in Sarajevo, too.
Investors have become more cautious as a result of the crisis, Spasenovic of Belgrade Independent brokerage house in Belgrade said.
“This cautiousness combines with the market's small depth and relatively modest liquidity to produce increased volatility,” he added.