End of the week horror
ZAGREB – Sooner than we could have imagined, CROBEX came very close to 4,000 points, marking the peak of adjustment which today resembled a siege.
The chaos could be best seen from CROBEX’s performance which, two hours before the end of trading, lost 3.6% after a positive 1% at the very start. However, the initial idyllic situation very soon turned into a wave of pessimism and aggressive liquidation which was largely caused by small investors.
Although regular turnover once again exceeded HRK 100mn, endless list of transactions suggests great activity of panicking small investors who persistently lowered the prices selling their portfolios, partly voluntarily but also pressured by present circumstances. A look at current happenings on the market is unpleasant, although it is even more unpleasant to receive a margin call which does not allow any other choice but to sell. Although such scenario is difficult to prove, the suggested small investors’ influence could be confirmed by rough calculations.
As usual, HT (HT-R-A), whose shares set a new record of HRK 290, must be left out due to dominant role of small investors in its case. However, there are a lot of examples suggesting a very active role of retail investors. For example, the average value of Dalekovod’s (ZSE:DLKV-R-A) shares was below HRK 20,000 today, while this number, in case of preferred shares of Adris group (ZSE:ADRS-P-A) or Ingra (ZSE:INGR-R-A) climbed to HRK 100 thousands. Anyhow, this was too little for institutional investors who are still only observing.
They are leaving the initiative to small investors, while the latter, faced with weak resistance, are continuously lowering prices and so expanding the list of issues which are suspended due to their drastic drop. Among them were Civil Engineering Institute of Croatia (IGH) (ZSE:IGH-R-A), Belišće (ZSE:BLSC-R-A), whose President dismissed acquisition speculations, Mlinar (ZSE.MLNR-R-A), Hidroelektra (ZSE:HDEL-R-A) and many others. They were all victims of the panics which resulted in two-digit losses compared to the day before and reduced P/E multiples to one-digit figures. However, this does not seem to help a lot at this point.
Shares are possibly cheaper considering their previous price levels, although not many of them are ready to accept the risk and neglect the dominating market momentum and resist the widespread pessimism by filling in purchase orders. Anyhow, any resistance of small investors would in this case be doomed to fail as it seems that only a more agile activity of institutional investors might change the strength proportion on the market.
Until then, we can only make historical comparisons which are not the least easy to “swallow”. Despite the last-minute recovery of the main index which closed the day with only 1.3% drop (and high turnover of HRK 136mn), we are where we were 11 months ago, while compared to its all-time-high, CROBEX currently dropped almost 25%. And, according to the known definition, which should be taken with a pinch of salt, it is slowly entering the bear market which should be confirmed or denied during next days (weeks).
On the other hand, last-minute recovery should be treated with due caution. It almost cut losses in half without any drastic changes in turnover amount which should be considered as bargain hunting, not indicative in any respect of the possible shift in trend.
Author/source: Mario Gitara
