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September 16, 2021

Erste Group: Euphoria after EU summit might give markets positive impulse over summer

Although the sovereign debt crisis will remain a negative factor for the markets, an euphoric momentum after the recent EU summit and market-positive results for the long-awaited Greek elections might help bring a bright spot on equity markets,  said in a new report Henning Esskuchen, Head of CEE Equity Research at Erste Group. “We revised our GDP forecasts down for a couple of CEE countries because of the gloomy external environment, with the most visible revision in the Czech GDP forecast  to -0.8 pc from 0 pc for 2012 and Croatia (to -1.8 pc from -1 pc for 2012). We also see further downward risks for Romania and Hungary (currently 1.2 pc and -0.5 pc, respectively),” also mentioned Esskuchen.However, the CEE region still has a stronger economic growth than many countries from the Eurozone or Western Europe (1.9 pc in CEE vs. -0.2 pc Euroland in 2012), the Head of CEE Equity Research at Erste Group highlighted. Also, uncertainty has undoubtedly entered the real economy, with all major sentiment indicators weakening. Emerging Europe was not spared from this development either and the latest ZEW/Erste sentiment indicator for CEE delivered weaker figures on all fronts. The report reveals that Romania & Bulgaria, both countries show quite strong expected returns through valuation as the main driving force. However, Romania has lost some of its appeal in terms of potential actions on the capital market, which also could have had an impact on its main problem – liquidity. Lately, hopes of a Transgaz transaction were revived. Due to the insolvency procedures of Hidroelectrica, the main target Fondul Proprietatea is currently not highly attractive. Hence, the Erste Group experts place RO & BG at neutral level for country allocation proposal.

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