Outlook for Stock Markets and the Vienna Stock Exchange
Mostboeck: “Favorable valuations and rising trading volume are signaling catch-up potential for the Vienna Stock Exchange”
- ATX forecast: a rally to 2,550 points by the end of 2016
- ECB asset purchase program provides impetus for stocks
- Earnings growth 2016e: +8%
The major CEE nations are able to post moderate, but robust growth. The task of consolidating government budgets has been tackled successfully as well. The ECB's asset purchase program has a stabilizing effect on financial markets and improves expectations for growth. Low interest rates continue to enhance the attractiveness of investing in stocks. Thanks to its sound fundamentals and an increase in trading volume, the Vienna Stock Exchange still exhibits catch-up potential.
The Vienna Stock Exchange could gain momentum in 2016, especially after a great many negative factors exerted pressure in the previous year. A majority of the constituent companies of the ATX have suffered significant earnings declines in 2014 and had to lower their earnings guidance. Moreover, geopolitical risks due to the Russia/Ukraine conflict have weighed on the market. However, there were also fundamental factors that have contributed to the disappointing performance of Vienna's stock market last year. “The ongoing ECB asset purchase program is improving growth prospects. The major CEE countries, which the Vienna stock exchange benefits from, continue to exhibit a robust and positive growth differential relative to the euro zone average. The mixture of one-off effects from the previous year and an improved environment result in the market's catch-up potential remaining intact”, states Fritz Mostboeck, head of the Group Research department. “Rising trading volumes on the Vienna Stock Exchange are confirming this trend.”
Recommendations: Real Estate Stocks, Technology Stocks, Industrials and High-Yielding Dividend Stocks
A combination of factors is clearly arguing in favour of stocks at present:
- Low interest rates
- Promising growth forecasts for Austria and the CEE region
- Positive trends in earnings growth
- Rising dividend yields
Low commodity prices and a significantly weaker euro compared to the previous year should have positive long term effects for numerous market sectors. Moderate valuations as well as favorable growth prospects in Central and Eastern European countries, which contribute around one third to the sales of constituent companies of Austria's benchmark index, are arguing in favor of the ATX. The low interest rate environment continues to support the real estate sector in particular. S Immo, CA Immo and UBM are currently topping the list of buy recommendations. Apart from these, primarily technology and industrial stocks are currently exhibiting an interesting mixture of positive sentiment and favorable valuations. The buy recommendations of Erste Group Research in these sectors include AT&S, Palfinger, and PORR. Low interest rates are however also weighing on a few sectors, such as e.g. the insurance sector. However, it appears that the negative sentiment has been more than fully priced in by now. As a result of the recent decline in their stock prices, both UNIQA and VIG are now exhibiting attractive valuations and high dividend yields. At current prices, Oesterreichische Post (Austrian Post Office) offers a dividend yield of more than 5% as well. Current prices are thus offering numerous entry opportunities.
Better Sentiment in Central and Eastern Europe
The global economic environment remains tense, however, attractive relative valuations in the CEE region are suggesting catch-up potential. In the emerging market segment mainly countries like China, Brazil, Russia, but also Latin American and Arabian countries remain under pressure due to low commodity prices. In a relative comparison, the performance of CEE countries is significantly better. CEE vs. euro zone: 2015e: +3.3% (vs. +1.5%), 2016e: +3.0% (vs. +1.8%), and 2017e: +3.2% (vs. +1.9%). Most of the major listed companies in Austria are already benefiting economically from the region or are very successful in certain global market niches. Key metrics such as earnings growth, P/E ratios, as well as dividend and earnings yields compared to bond yields are signalling catch-up potential for Vienna's stock market in 2015 and 2016. “Overall, we expect the ATX to reach a level of 2,550 points by the end of 2016”, Mostboeck says further.
The major CEE nations are able to post moderate, but robust growth. The task of consolidating government budgets has been tackled successfully as well. The ECB's asset purchase program has a stabilizing effect on financial markets and improves expectations for growth. Low interest rates continue to enhance the attractiveness of investing in stocks. Thanks to its sound fundamentals and an increase in trading volume, the Vienna Stock Exchange still exhibits catch-up potential.
The Vienna Stock Exchange could gain momentum in 2016, especially after a great many negative factors exerted pressure in the previous year. A majority of the constituent companies of the ATX have suffered significant earnings declines in 2014 and had to lower their earnings guidance. Moreover, geopolitical risks due to the Russia/Ukraine conflict have weighed on the market. However, there were also fundamental factors that have contributed to the disappointing performance of Vienna's stock market last year. “The ongoing ECB asset purchase program is improving growth prospects. The major CEE countries, which the Vienna stock exchange benefits from, continue to exhibit a robust and positive growth differential relative to the euro zone average. The mixture of one-off effects from the previous year and an improved environment result in the market's catch-up potential remaining intact”, states Fritz Mostboeck, head of the Group Research department. “Rising trading volumes on the Vienna Stock Exchange are confirming this trend.”
Recommendations: Real Estate Stocks, Technology Stocks, Industrials and High-Yielding Dividend Stocks
A combination of factors is clearly arguing in favour of stocks at present:
- Low interest rates
- Promising growth forecasts for Austria and the CEE region
- Positive trends in earnings growth
- Rising dividend yields
Low commodity prices and a significantly weaker euro compared to the previous year should have positive long term effects for numerous market sectors. Moderate valuations as well as favorable growth prospects in Central and Eastern European countries, which contribute around one third to the sales of constituent companies of Austria's benchmark index, are arguing in favor of the ATX. The low interest rate environment continues to support the real estate sector in particular. S Immo, CA Immo and UBM are currently topping the list of buy recommendations. Apart from these, primarily technology and industrial stocks are currently exhibiting an interesting mixture of positive sentiment and favorable valuations. The buy recommendations of Erste Group Research in these sectors include AT&S, Palfinger, and PORR. Low interest rates are however also weighing on a few sectors, such as e.g. the insurance sector. However, it appears that the negative sentiment has been more than fully priced in by now. As a result of the recent decline in their stock prices, both UNIQA and VIG are now exhibiting attractive valuations and high dividend yields. At current prices, Oesterreichische Post (Austrian Post Office) offers a dividend yield of more than 5% as well. Current prices are thus offering numerous entry opportunities.
Better Sentiment in Central and Eastern Europe
The global economic environment remains tense, however, attractive relative valuations in the CEE region are suggesting catch-up potential. In the emerging market segment mainly countries like China, Brazil, Russia, but also Latin American and Arabian countries remain under pressure due to low commodity prices. In a relative comparison, the performance of CEE countries is significantly better. CEE vs. euro zone: 2015e: +3.3% (vs. +1.5%), 2016e: +3.0% (vs. +1.8%), and 2017e: +3.2% (vs. +1.9%). Most of the major listed companies in Austria are already benefiting economically from the region or are very successful in certain global market niches. Key metrics such as earnings growth, P/E ratios, as well as dividend and earnings yields compared to bond yields are signalling catch-up potential for Vienna's stock market in 2015 and 2016. “Overall, we expect the ATX to reach a level of 2,550 points by the end of 2016”, Mostboeck says further.
