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Financial Front
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Market Watch Investment funds may become stocks of choice with new law The Czech market does not seem popular enough lately to sustain strong growth that lasts more than a month. March saw the PX-50 stock index visiting its old home above the 500-point level as it followed the global buying spree. Since the beginning of April, however, it has continued to slip away from the 500 mark on shrinking volumes, though at an increasingly slower pace. So is it just a short term correction or perpetual deja vu? Emerging markets are generally not as popular as they used to be, and the Czech market is lately one of the least liked in the Central and East European region. Its last true rally was washed away by autumn's global shock wave that came from Asia. Although the Czech market has picked up a few times since the political meltdown in November, the political uncertainty has prevented it from rallying on the positive economic signals coming from some macro indicators and several corporate financial results for last year. All factors considered, we cannot argue strongly for a substantial revival of the market in the pre-election period. Increasingly nervous behavior and shrinking trading volumes will provide a fruitful field for short-term speculation that is fueled by rumors. Some Czech stocks are now very cheap relative to regional peers, and the market sees lower than average investment from foreigners. Last week's political scene was unusually quiet of late, with the Chamber of Deputies putting in a productive week that was highlighted by its NATO ratification and approval of the fund law amendment. Consequently, the market ran sideways largely on mixed performances among the blue chips. SPT Telecom's share price felt a gentle profit-taking bite by investors after the title's strong performance in the last 12 months. Meanwhile, Komercni banka shares fell by some 3 percent on a continuing abundance of unfounded rumors. CEZ and Unipetrol were the main sidewinders on a lack of major corporate news. However, Ceska sporitelna gained after the bank announced an improvement of its loan book quality and good 1998 earnings prospects. One sector in particular continues to strike our fancy because it remains unencumbered by the political turmoil and stands poised to offer good returns in both the short and long term. With long-awaited legislation approved by the lower chamber of Parliament, investment funds dominate our buy list in spite of their recent price performances. Large and liquid RIF presently trades at a discount higher than 30 percent of its net asset value (NAV). Furthermore, the fund will likely pay a dividend yielding some 10 percent. Expected to perform well by measure of its NAV in the past, RIF should open before the end of 1999. Both ZB-PF and SPIF Vynosovy are also very attractive by our standard measures of discount, dividend and NAV performance. ZB-1.IF recently boosted its NAV by selling a strategic stake. Although its price has increased over the last month, its discount of some 40 percent still allows room for appreciation. -- Prepared by Petr Posker, lead analyst at Atlantik financni trhy Tel. (420 05) 45 512 182 Fax: (420 05) 45 512 101 |
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