Raiffeisen
Weekly Report
Number 9
March 9th, 2015
New issuance: 10-year Eurobond with a
deep discount
5Y USD CDS
390
340
bb
290
240
190
Croatia
Hungary
3.15
1.15
9.14
11.14
7.14
5.14
3.14
1.14
9.13
11.13
7.13
90
5.13
140
Romania
Slovenia
Sources: Bloomberg, Raiffeisen RESEARCH
HRK T-bills
3.0
2.5
2.0
% 1.5
1.0
0.5
0.0
3
4
5
6
7
8
9
months to maturity
2.1.2013
3.3.2015
10
11
12
2.7.2013
Sources: MoF, Raiffeisen RESEARCH
GDP and industrial output, real
annual change
4
2
0
–2
%
–4
–6
–8
Real GDP (% yoy)
Industrial output (% yoy)
Sources: CBS, Raiffeisen RESEARCH
2016f
2015f
2014
2013
2012
2011
2010
2009
2008
–10
Last week was marked by the government’s new Eurobond issuance. Croatia’s
government sold a EUR 1.5 bn 10y Eurobond with a 3% coupon rate at a
255-bp spread over mid swaps. This has been the first EUR issuance on foreign
markets in the last nine months. The issue attracted a huge demand from investors, with order books reaching EUR 6.25 bn, amidst the ongoing hunt for yields
due to extremely low interest rates in the developed markets (Croatia financed
itself at the lowest yield ever: at 3.25%). Furthermore, the limited supply of EUR
paper from SEE region and Croatia in particular was an additional supportive
factor. Still, Croatia is among the few CEE countries whose Eurobonds yield is
close or above 3%, and it offers a reasonable spread pick-up over Turkey which
suffers from chronic economic imbalances and political instability. We expect a
temporary stabilization of Croatia’s BB rating (the outlook is stable). Moody’s
has a negative outlook on Croatia‘s Ba1 rating, which, if downgraded, represents a one notch downside in our consideration. The average rating for Croatia
would be BB with a stable outlook, taking into account the risk of a single notch
rating downgrade from Moody’s. We foresee a modest shrinking of Croatia’s
fiscal deficit to 5% of GDP in 2015, as we expect no improvement of the public
debt-to-GDP-ratio (it reached 80% of GDP with a tendency of further growth).
The main risk to Croatia’s rating continue to be the fiscal policy, relatively high
public deficit and flat economic growth which limits the fiscal flexibility. Although
the government has encouraged speculation that there will not be any more
borrowing, the latest information does not support this expectation. The Finance
Minister said last week that Croatia was also looking at “eastern markets” to sell
debt and that Croatia wanted to refinance debt as long as borrowing conditions
remain “favourable” as he alleged. Nevertheless, as in all previous years so far,
it is difficult to assess when, where and in which amount the Government will
place the bond or take a credit line, and this itself speaks for the transparency
of public finances.
As for economic releases, the industrial output and the final 2014 GDP figures
were released. In line with our expectations, the January industrial output reported a negative rate, but the decline was stronger than expected (–5% yoy and –4%
mom). The negative annual growth rate has been the highest one in the last 20
months (since May 2013). The largest negative contribution came from the manufacturing industry (accounting for almost 82% of the total figure) which recorded
a strong annual drop of 6.5%yoy. This is the first annual decline of manufacturing
industry after 12 positive months in a row. Regardless of the positive growth rates
of industrial production that were recorded during the last few months of 2014,
a strong production decline in January once again highlighted the low competitiveness of the industry and the fragile recovery that is dominantly influenced by
foreign demand and low base effect. Therefore, the expected growth of industrial
production at a positive rate of 1.5% in 2015 is primarily based on foreign demand of our trading partners, while the domestic demand will remain weak.
The lack of a recovery in the domestic demand will also support the continuation
of negative PPI figures in February (–5.5% yoy) and limited retail trade growth
(retail trade is expected to have grown by 1% yoy in January), with these figures
Market Comment/Outlook
EUR/HRK market rate and forecast
7.76
7.72
forecast
7.68
7.64
7.60
12.15
9.15
6.15
3.15
12.14
9.14
6.14
12.13
7.52
3.14
7.56
* Prices as of 6 March 10:00 CET
Sources: Bloomberg, Raiffeisen RESEARCH
Yield curve – bonds
5
4
3
%
2
1
0
0
1
2
3
4 5 6 7 8
years to maturity
EUR-linked bonds
Eurobonds (USD)
* Prices as of 6 March 10:00 CET
Source: Raiffeisen RESEARCH
9 10 11
Eurobonds (EUR)
HRK bonds
to be released this week. Also, issued building permit figures are to be published.
The expected decline probably will be supported by the high base, as H1 2014
was marked by a temporary increase in the number of issued building permits.
The construction sector remains in a deep recession, which is also confirmed by
the latest GDP data: construction was the biggest negative contributor to gross
value added (GVA) in Q4 2014 as it declined for the six year in a row at 6.7%
yoy. On the other hand the manufacturing industry reported a real increase of
3% yoy thus mitigating negative trends. Real GVA in 2014 fell 0.3% yoy. Although the seasonally adjusted quarterly GDP increased by 0.05% compared
to the Q32014 and by 0.4% compared to the same quarter of 2013, the final
2014 figure of –0.4% has confirmed that Croatia remains trapped in recession
in which it lost more than 12% of the real economy.
In the meantime, EUR/HRK dropped below 7.65 reaching even 7.62 kuna per
euro which is the lowest level this year. The reason is probably the previous relatively strong growth of the EUR / HRK rate and the larger CNB intervention. Amid
solid trading volumes and pronounced corporate supply of euros, the HRK, for
the first time this year, was exposed to the appreciation pressures. Increased corporate FCY supply comes from direct foreign borrowing which is not surprising,
given the abundance of liquidity in the global markets. In the upcoming week we
expect a trading range between 7.61 to 7.65 kuna per euro. As the Easter and
the early tourist season draw closer, the demand for domestic currency should
pick up, thus creating some appreciation pressures. However, these seasonal
FX movements might be less prominent; the forecast HRK appreciation is milder
than the average of previous years. Much like last year, FX market developments
might largely depend on the positioning of market participants, especially institutional investors. Just to remind that opening/closing of forward agreements by
institutional investors last year largely limited seasonal oscillations of the EUR/
HRK exchange rate.
As regards debt market, this week we expect neutral or even a slight decline
in yields on EUR Eurobond issues. Domestic markets might see reduced trading
volumes with yields range-bound. Finally, this Tuesday the Ministry of Finance is
offering HRK 1.3 bn pure HRK T-bills. At the same time HRK 1.69 bn and EUR
1.5 mn is maturing. Although liquidity, for the first time in the last six months,
fell below HRK 3 bn last week, it would not create any pressures on the yields.
Namely, the MoF will distribute pensions by Tuesday already, causing again
significantly improvement in market liquidity and, along with the lack of investment alternatives, T-bill yields will probably remain at the current levels (1.5 for
1-year pure HRK).
Financial analyst: Zrinka Zivkovic Matijevic (+385 1 61 74 338), Raiffeisenbank Austria d.d., Zagreb
2
March 9th, 2015
Equity Market
Low trading and increase of main indices
Hrvatski Telekom (3 m)
168
164
160
156
20.2.
3.3.
20.2.
3.3.
CROBEX
11.2.
2.2.
22.1.
13.1.
8.12.
148
31.12.
152
17.12.
Trading comment
Last week on the Zagreb stock exchange was marked by lower trading activity.
Regular share turnover peaked on Thursday with HRK 13 mn while the average
daily turnover amounted to HRK 9 mn. CROBEX index rose 0.89% after two
consecutive weeks of decline and CROBEX 10 also increased by 0.97%. Among
the sector indices CROBEXnutris recorded the biggest gain, while CROBEXturist
index was the weakest performer. Most liquid share on the regulated market was
that of Hrvatski Telekom. Among CROBEX constituents biggest gain of 11.76%
was delivered by share of Zagrebačka banka, while Viadukt dipped the most
by 6.26%. Regional indices were mostly on the rise with BELEX15 gaining the
most. The regular revision of CROBEX resulted in deletion of nine stocks, among
them Petrokemija, and inclusion of eight new members, most of them being from
tourism sector. The index will be calculated with the new composition starting on
March 23rd 2015.
HT
Sources: ZSE, Raiffeisen RESEARCH
Dalekovod (3 m)
In this week
We expect weak activity on the stock market due to lack of significant events
scheduled for this week, with the focus mainly on the blue chip shares.
18
17
16
15
14
CROBEX
11.2.
2.2.
22.1.
13.1.
8.12.
12
31.12.
13
17.12.
Company news
Management and Supervisory Board of Zagrebačka banka have proposed a
dividend payment in amount of HRK 3.60 per share. Ex-dividend date is April
29th 2015 and the payout is due on May 20th 2015. Turisthotel decided to
withdraw 28,000 of its own shares and to decrease the equity capital of the
company by just over HRK 12 mn. Dalekovod signed a new contract with BKK
NET AS, a Norwegian distributor of electric energy. Contract is for construction
of new transmission lines and value is slightly above EUR 7 mn.
DLKV
Sources: ZSE, Raiffeisen RESEARCH
Financial analyst Jadran Simić (+385 1 45 66 478), Raiffeisenbank Austria d.d. Zagreb
Market performance
Top/Flop – CROBEX index
Index
1w %
ytd %
Value on*
ATX (AT)
1.84
17.64
2,541
BELEX15 (RS)
2.12
0.74
672
BETI (RO)
0.11
1.00
7,154
Share
1w %
Zagrebačka Banka
11.76
38
Uljanik Plovidba
7.07
150
Varteks
3.30
20
Jadroplov
–0.03
90
Vupik
3.13
81
RIZ-Odašiljači
–0.87
102
Dalekovod
3.05
15
Belje
–0.89
31
HT
3.03
168
Atlantic Grupa
–1.21
905
6.3.2015
BUX (HU)
0.18
9.67
18,243
CROBEX (HR)
0.89
0.90
1,761
1.43
9.57
1,037
–1.56
23.98
1,731
PX (CZ)
MICEX (RU)
SBITOP (SI)
0.71
2.29
802
SOFIX (BG)
–2.34
–8.76
476
SASX10 (BH)
–0.17
–2.16
699
0.89
10.48
1,086
–0.71
1.48
2,350.22
NTX (SEE,CE,EE)
WIG20 (PL)
* as at 16:30 CET. Source: Bloomberg
March 9th, 2015
Price on*
Share
1w %
6.3.2015
Price on*
6.3.2015
Kraš
0.00
400
Ina
0.00
3,600
Tehnika
2.74
375
Arenaturist
–1.21
325
Adris Grupa (P)
2.56
360
Končar EI
–1.28
690
Ledo
1.94
7,900
AD Plastik
1.90
82
Ericsson NT
0.90
1,344
Valamar Riviera
0.78
Petrokemija
0.05
Podravka
–1.44
302
Atlantska Plov.
–2.26
254
Đuro Đaković H.
–3.96
32
19
Luka Rijeka
–5.13
65
19
Viadukt
–6.26
253
* as at 16:30 CET. Source: ZSE, Raiffeisen RESEARCH
3
Impressum
Raiffeisen RESEARCH
Raiffeisenbank Austria d.d. Zagreb
Economic Research Department
Zrinka Živković Matijević, MSc, Head of Department; tel: +385 1/61 74 338, e-mail: [email protected]
Tomislava Ujević, Economic Analyst; tel: + 385 1/46 95 099, e-mail: [email protected]
Marijana Cigić, MSc, Economic Analyst; tel: + 385 1/61 74 606, e-mail: [email protected]
Financial Advisory Services Department
Nada Harambašić Nereau, MSc, Financial Analyst; tel.: + 385 1/61 74 870, e-mail [email protected]
Jadran Simić, Financial Analyst; tel: +385 1/45 66 478, email: [email protected]
Treasury and Investment Bank Division
Ivan Žižić, Executive Director; tel: +385 1/46 95 076, e-mail: [email protected]
Raiffeisen Invest
Marek Prokopec, President of the Management Board; tel: + 385 1/60 03 721, e-mail: [email protected]
Vesna Tomljenović Čičak, Member of the Management Board; tel: + 385 1/60 03 702, e-mail: [email protected]
Bojan Vuković, Member of the Management Board; tel: + 385 1/60 03 720, e-mail: [email protected]
Abbreviations
avg
bp
C/A
CBS
CES
CNB
DPS
EC
ECB
EDP
EM
eop
–
–
–
–
–
–
–
–
–
–
–
–
average
basis points
current account
Croatian Bureau of Statistics
Croatian Employment Service
Croatian National Bank
dividend per share
European Commission
European Central Bank
Excessive Deficit Procedure
Emerging Markets
end of period
EUR –
FCY –
FED –
FI
–
FY
–
GDP –
GFCF –
ILO –
Euro
foreign currency
Federal Reserve System
financial institutions
full year
Gross Domestic Product
Gross fixed capital formation
International Labour
Organisation
IMF – International Monetary Fund
kn, HRK – Kuna
LSE – London Stock Exchange
MoF –
mom –
ON –
MM –
MFEA –
SMP
SNA
USD
yoy
–
–
–
–
Ministry of Finance
month over month
overnight
money market
Ministry of Foreign and
European Affairs
Securities markets programme
Aystem of national accounts
Dollar
year over year
Publisher
Raiffeisenbank Austria d.d. Zagreb
Petrinjska 59, 10000 Zagreb
www.rba.hr
tel. ++385 1/45 66 466
fax: ++385 1/48 11 626
Publication finished on March 6th, 2015
4
March 9th, 2015
Disclaimer Financial Analysis
Publisher: Raiffeisenbank Austria d.d. (abbreviated as “RBA”). Research and analysis is an organisational unit of RBA. Supervisory
authority: Croatian Financial Services Supervisory Agency (HANFA). This document is for information purposes and may not be reproduced or distributed to other persons. This document constitutes neither a solicitation of an offer nor a prospectus in the sense of the
Croatian Capital Market Act (CMA) or any other comparable foreign law. An investment decision in respect of a security, financial
product or investment must be made on the basis of an approved, published prospectus or the complete documentation for the security,
financial product or investment in question, and not on the basis of this document. This document does not constitute a personal recommendation to buy, hold or sell financial instruments in the sense of the CMA. Neither this document nor any of its components shall
form the basis for any kind of contract or commitment whatsoever. This document is not a substitute for the investment advice on the
purchase, hold or sale of a security, investment or other financial product. In respect of the sale, hold or purchase of securities, investments or financial products, authorized investment advisor can provide individualised advice which is suitable for investments and financial products. This analysis is fundamentally based on generally available information. Unless otherwise expressly stated in this
publication, RBA deems all of the information to be reliable, but does not make any assurances regarding its accuracy and completeness. In emerging markets, there may be higher settlement and custody risk as compared to markets with established infrastructure. The
liquidity of stocks/financial instruments can be influenced by the number of market makers. Both of these circumstances can result in
elevated risk in relation to the safety of investments made on the basis of the information contained in this document. The information in
this publication is current, up to the creation date of the document. It may be outdated by future developments, without the publication
being changed. RBA may have affected an own account transaction in any investment mentioned herein or related investments and or
may have a position or holding in such investments as a result. RBA may have been, or might be, acting as a manager or co-manager
of a public offering of any securities mentioned in this report or in any related security. RBA may have been, or might be, acting as a
market maker or liquidity provider for company or securities mentioned in this report. Unless otherwise expressly stated the analysts
employed by RBA are not compensated for specific investment banking transactions. Compensation of the author or authors of this report is based (amongst other things) on the overall profitability of RBA, which includes, inter alia, earnings from investment banking and
other transactions of RBA. In general, RBA forbids its analysts and persons reporting to the analysts from acquiring securities or other
financial instruments of any enterprise which is covered by the analysts, such acquisition must be authorised in advance by RBA’s Compliance Department. RBA has put in place the following organisational and administrative agreements, including information barriers,
to impede or prevent conflicts of interest in relation to recommendations: RBA has designated fundamentally binding confidentiality
zones. Confidentiality zones are typically units within credit institutions, which are isolated from other units by organisational measures
governing the exchange of information, because compliance-relevant information is continuously or temporarily handled in these zones.
Compliance-relevant information may fundamentally not leave a confidentiality zone and is to be treated as strictly confidential in internal business operations, including interaction with other units. This does not apply to the transfer of information necessary for usual
business operations. Such transfer of information is limited, however, to what is absolutely necessary (need-to-know principle). The
exchange of compliance-relevant information between two confidentiality zones may only occur with the involvement of the Compliance Officer. SPECIAL REGULATIONS FOR THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND (UK): This document
does not constitute either a public offer in the meaning of the Kapitalmarktgesetz („KMG“) nor a prospectus in the meaning of the KMG
or of the Börsegesetz. Furthermore this document does not intend to recommend the purchase or the sale of securities or investments in
the meaning of the Wertpapieraufsichtsgesetz. This document shall not replace the necessary advice concerning the purchase or the
sale of securities or investments. For any advice concerning the purchase or the sale of securities of investments kindly contact your
RAIFFEISENBANK. Special regulations for the United Kingdom of Great Britain and Northern Ireland (UK): this publication has been
either approved or issued by Raiffeisen Bank International AG (RBI) in order to promote its investment business. Raiffeisen Bank International AG, London Branch is authorised by the Austrian Financial Market Authority and subject to limited regulation by the Financial
Conduct Authority (“FCA”). Details about the extent of our regulation by the Financial Conduct Authority are available from us on
request. This publication is not intended for investors who are Retail Customers within the meaning of the FCA rules and should therefore not be distributed to them. Neither the information nor the opinions expressed herein constitute or are to be construed as an offer or
solicitation of an offer to buy (or sell) investments. RBI may have affected an Own Account Transaction within the meaning of FCA rules
in any investment mentioned herein or related investments and or may have a position or holding in such investments as a result. RBI
may have been, or might be, acting as a manager or co-manager of a public offering of any securities mentioned in this report or in
any related security. SPECIFIC RESTRICTIONS FOR THE UNITED STATES OF AMERICA AND CANADA: This document may not be
transmitted to, or distributed within, the United States of America or Canada or their respective territories or possessions, nor may it be
distributed to any U.S. person or any person resident in Canada, unless it is provided directly through RB International Markets (USA)
LLC, a U.S. registered broker-dealer (‘RBIM’), and subject to the terms set forth below. SPECIFIC INFORMATION FOR THE UNITED
STATES OF AMERICA AND CANADA: This research document is intended only for institutional investors and is not subject to all of the
independence and disclosure standards that may be applicable to research documents prepared for retail investors. This report was
provided to you by RB International Markets (USA) LLC, a U.S. registered broker-dealer (‘RBIM’), but was prepared by our non-U.S.
affiliate, Raiffeisen Bank International AG (RBI). Any order for the purchase or sale of securities covered by this report must be placed
with RBIM. You can reach RBIM at 1133 Avenue of the Americas, 16th Floor, New York, NY 10036, 212 – 600 – 2588. This document
was prepared outside the United States by one or more analysts who may not have been subject to rules regarding the preparation of
reports and the independence of research analysts comparable to those in effect in the United States. The analyst or analysts who
prepared this research (i) are not registered or qualified as research analysts with the Financial Industry Regulatory Authority (FINRA)
in the United States, and (ii) are not allowed to be associated persons of RBIM and are therefore not subject to FINRA regulations,
including regulations related to the conduct or independence of research analysts. The opinions, estimates and projections contained in
this report are those of RBA only as of the date of this report and are subject to change without notice. The information contained in this
report has been compiled from sources believed to be reliable by RBA, but no representation or warranty, express or implied, is made
by RBA or its affiliated companies or any other person as to the report’s accuracy, completeness or correctness. Securities which are not
registered in the United States may not be offered or sold, directly or indirectly, within the United States or to U.S. persons (within the
meaning of Regulation S under the Securities Act of 1933 [the ‘Securities Act’]), except pursuant to an exemption under the Securities
Act. This report does not constitute an offer with respect to the purchase or sale of any security within the meaning of Section 5 of the
Securities Act and neither shall this report nor anything contained herein form the basis of, or be relied upon in connection with, any
contract or commitment whatsoever. This report provides general information only. In Canada it may only be distributed to persons who
are resident in Canada and who, by virtue of their exemption from the prospectus requirements of the applicable provincial or territorial securities laws, are entitled to conduct trades in the securities described herein. If any term of this Disclaimer is found to be illegal,
invalid or unenforceable under any applicable law, such term shall, insofar as it is severable from the remaining terms, be deemed
omitted from this Disclaimer; it shall in no way affect the legality, validity or enforceability of the remaining terms.
March 9th, 2015
5