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In times of growth as well as in times of market decline,
out of the line and start a phase of irrational exaggerati
returns that are usually achievable long term. Our last ne
Croatian capital market and concluded it had never be
earnings of the CROBEX index currently lies at unseen le
which all secular growth trends have started on the de
determine the very bottom at which a reversal will happe
has certainly entered a phase of acute undervaluation,
lasted over the past 10 years.
Deflated, the CROBEX index lies below its level in the ye
consolidating, except for the period between 2006 and 2
periods, the Croatian capital market has obviously never b
Irrational exaggeration
0
1000
2000
3000
4000
5000
6000
1996 1997 1998 1999 2000 2001
Defla
C art: De ate CROBEX I n ex
In 2008, Western European markets dropped by 42% in av
by a much higher 68% during the same period. On th
comparison with European ones, through the highest corr
justify it.
-80,00%
-70,00%
-60,00%
-50,00%
-40,00%
-30,00%
-20,00%
-10,00%
0,00%
UnitedKingdom
Njemak
a
Italy
France
Spain
WesternEurope
Chart: Price decrease in terms of stock exchange i
there is a phase when masses and their psychology step
on. In such environment, positions are made of extreme
sletter already discussed the trend of valorisation of the
en historically cheaper. The relation between price and
vels until now and totals 5.5. This is within the range, in
veloped financial markets. It is off course impossible to
, but it is possible to draw the conclusion that the market
which represents the end of a falling secular trend that
rs 1996/97. Since then, the trend of the index value was
07. Given that secular trends represent long term growth
een in such a trend.
Thursday, 27.11.2008
002 2003 2004 2005 2006 2007 2008
ed CROBEX IndexSource: Agram Brokeri
erage, central European ones by 56%, while Croatian fell
t account, the Croatian financial market has gone, in
ction, even though the fundamental background did not
Austria
Poland
Czech.Rep
Hungary
Slovenia
CentralEurope
Croatia
ndex in 2008
Source : Bloomberg
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4
6
8
10
12
Such a fall generates an obvious comparative underval
return among the highest in central Europe.
Chart: P/E relation central European markets
2,00%
3,00%
4,00%
5,00%
6,00%
7,00%
8,00%
0
2
Austria Poland Czech.Rep
Chart: Dividend returns central European marke
0,00%
,
Austria Poland Czech.Rep H
The crash that recently happened in Hungary and Pol
domestic currency, and their solicitation of IMF help, al
and its comparative undervaluation are the result of an
currency with sufficient foreign currency reserves to full
Therefore, positions in low indebted companies with hi
constitute an excellent investment opportunity, given
results. The masses are currently depressed, and wh
discounted prices that guarantee significant long term r
ation, with P/E relation among the lowest and dividend
Hungary Slovenia Central Europe Croatia
Source : Bloomberg
s
ungary Slovenia CentralEurope
Croatia
Source : Bloomberg
nd, their lack of foreign currency reserves stabilising the
l of this, points out that the decline of the Croatian
market
irrational exaggeration. All the more since we have a stable
cover all the cash in circulation.
h growth rates and full order books for the next two years
that the crisis will not significantly affect their
financial
en such is the case, it usually offers financial assets at
turns.
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10%
20%
30%
40%
50%
60%
70%
80%
Chart: Opinion poll on Croatian citizen sentiment
Opinion polls on Croatian citizen sentiment of the Croati
halved in the last 6 months, while pessimistic almost dou
beginning of the financial turbulences, it believed it woul
0%
Optimistini
12.4.20
Optimistic
n economy reveal that the number of optimistic has been
bled. Were the masses reasonable when, mid April at the
not hit Croatia? Are the very same masses right today?
eutralni Pesimistini
08 20.11.2008Source : www.net.hr
eutral Pessimistic
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