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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
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March 9th, 2015
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