Croatian banker: Balkan stock exchanges face turmoil

28/04/2008

In an interview with the Southeast European Times, Croatian investment banker Tomislav Tukic says that Balkan stock exchanges face a crisis not only because of the global difficulties stemming from the US and European stock markets.

By Ivo Scepanovic for Southeast European Times in Split – 28/04/08

Tomislav Tukic. [Ivo Scepanovic]

Tomislav Tukic, head of the Croatian investment fund ST Invest, believes that the political turmoil in Serbia and its uncertain denouement could affect stock exchanges in the Balkans.

''The worsening performance of stocks and investment funds has been influenced by the crisis in Europe and the United States; however, the Balkan countries also suffer from other factors, including the crisis in Serbia,'' Tukic said. He and other experts note how the Balkan stock exchanges lost liquidity after a withdrawal of funds from the region.

''Illiquid stock markets boost fears among investors," he said.

Other experts concur that Balkan stock exchanges and investment funds enjoyed a stunning rise in the last few years in which certain stocks and sectors exceeded their true value. Average investors question whether stocks and funds in the region can return to levels posted at the end of 2007.

''Companies would need to sustain and increase profits in a way that investors expect from them. In that case, stock exchanges would return to the level they attained from the end of last year. However, that level was very high, and the ability to regain it is hard to predict,'' explains Tukic.

According to him, if future business results demonstrate stability and profit growth and if they come with regional stability, one could expect a calming of stock and fund prices.

''We should not forget that, technically speaking, stock exchanges are experiencing a downtrend. The global situation influences the Balkan region, and it is still open to question when we can expect an escape from a global downtrend. In such situations, investment funds need active management capable of reacting fast to all the opportunities that the market offers. They need to exploit the volatility that we have experienced since the year began and that we'll probably face in upcoming months,'' said Tukic.

He sees an answer if companies in the region fulfil expectations with their business results. A resolution of the Serbian crisis also would help.

''The entire region would have problems if a political solution in Serbia fails to create internationally accepted standards for market growth. After such a negative development, it would be questionable whether even a positive development in American and European markets would influence our part of the market much,'' he said.

A suggestion Tukic offers to those who buy into investment funds is to recognise their long-term nature.

''History teaches us that a long-term investment ... shows the best results. Investment watchers should acknowledge that volatility makes up part of a stock exchange. History also demonstrates that, over the long term, investing during crises could bring great profits,'' he noted.