Croat stocks boosted by EU entry prospect but need improvement

ZAGREB (Reuters) – Rising share prices and higher trading volume in recent months suggest Croatia’s small stock market is gaining pace ahead of European Union accession talks, but observers say it still lacks scale and transparency. The Zagreb Stock Exchange (ZSE) Crobex index reached an all-time high of 2093.01 points last Tuesday after rising 32 percent in 2004 and soaring another 30 percent last month. Last year’s turnover in Zagreb, totaling 2.62 billion kuna ($453.8 million), was 75 percent greater than in 2003. The trend continued in January with turnover of 623 million kuna, an increase of 63 percent from December and up more than seven times the level of January 2004. «Even though trade started to grow from the start of 2004, it really intensified from last summer when Croatia became an EU candidate,» said Ivana Blaskovic at Raiffeisenbank Zagreb. «Investors started looking for new markets and spotted the Balkans, where they see more room for growth.» The central bank plans to fully liberalize trade in local shares over the next few months. At the moment, foreigners are not allowed to sell acquired shares to residents within a year from their purchase, but many countries are exempt from the ban. Market capitalization of the firms listed in Zagreb grew 66 percent to 62 billion kuna in 2004, with average daily turnover of 95 million kuna ($16.46 million). By comparison, the top 10 firms in Budapest, Prague and Warsaw have average daily turnover of up to $50 million each. Along with the top-tier stocks – drugs concern Pliva and food group Podravka – investors are also showing a healthy appetite for shipping firms, electrical concerns Koncar and Ericsson Nikola Tesla and lucrative tobacco producer Adris. «Foreign institutional investors from northern Europe and neighboring Slovenia are very active and keep the market going. Gains are more attractive than in their home markets,» said Hrvoje Stojic, an analyst at Hypo Alpe-Adria-Bank. However, analysts warned that a sustainable revival of Croatia’s stock market is still some way off and could be thwarted by a lack of transparency and the slow pace of reforms. «If market reforms and privatization continue, the local companies are likely to become more profitable and attractive. If not, we could see stagnation again,» Blaskovic said. The vast majority of the firms are listed in the so-called public companies tier, with looser financial reporting requirements.

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