Vienna stock market equities: earnings barometer points towards sunshine

Bright prospects thanks to positive earnings estimates for 2008
Cash reserves should lead to higher dividends

It is rather comforting taking a first look at the year 2008, which looks like being the seventh year in a row with rising earnings for the Vienna stock market. According to the calculations of CA IB analysts, earnings growth in 2008 should reach 9.7%. A further reason for investors into the Austrian market to be optimistic is the hope for continued increases in the already ample dividends, since companies are sitting pretty on generous cash flows.

According to Alfred Reisenberger, Head of Austrian Equities Analysis at CA IB International Markets, the upbeat expectations with regard to earnings development in 2008 are based on very encouraging economic conditions throughout Europe. The in-house economists are even banking on an interest cut in the USA, which would clearly benefit equities. 

All eyes on dividend increases
Thanks to their high revenues in previous years companies have been able to build up healthy cash positions. According to the estimates of CA IB, the cash holdings accumulated by ATX companies alone total EUR 5.9 billion, which corresponds to 7% of the ATX market capitalisation. By 2008 this figure could rise up to even EUR 9 billion, or 10% of the ATX capitalisation. "Companies can pursue three different strategies with this money: target acquisitions, buy back shares or adopt an even more generous dividend policy. In each case investors can expect to see the money flowing back to them", explained Reisenberger.

The ATX is currently being traded at a P/E ratio of 12.8, which is roughly 4% under its long-term average. Such low valuations are currently typical across all of the Western European markets. Based on the latest – and positive – quarterly results, the healthy economic environment, the low valuation and the recent dip in the price of oil, Reisenberger is anticipating an easy and pleasant time for the Vienna Stock Exchange in the remaining months of 2006. By year-end the ATX should be sitting at around 3,950 points.

Elections pique interest of investors abroad
Rarely has the interest in the outcome of upcoming general elections been as intense as it is just now. As demonstrated by the extremely well attended investor conference of CA IB and the Vienna Stock Exchange in London this week, investors are desperate to find out how economic policy will shape up going forward, after the failed merger of Verbund and OMV left a lasting impression.

In choosing equities, Reisenberger still advises being selective. Voestalpine has been upgraded from Hold to Buy in comparison to the last investment strategy. The analysts also like the look of AT&S, Böhler-Uddeholm, Immofinanz and Immoeast, OMV, Post, Verbund, Wiener Städtische and Zumtobel.

Enquiries: Bank Austria Creditanstalt International Markets 
Veronika Fischer-Rief, Tel. +43 (0)5 05 05 ext. 82833;
E-mail: veronika.fischer-rief@ba-ca.com 



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