Austrian stock market outlook for Q1 2011:
Vienna Stock Exchange creeps up again
- Market benefits from nascent boom in Germany and recovery in Eastern Europe, the relatively favourable budget situation ensures additional investor interest
- UniCredit analysts expect an ATX of 3,075 points in 12 months, with a total potential return of 11 percent
- Strategy: current portfolio relies on banking and property securities with a marked Eastern Europe orientation and cyclicals referencing Germany
With a 16 percent increase in the ATX, last year the Vienna Stock Exchange was the second best-performing stock market in the euro zone. In the process the market benefited specifically from the nascent boom in Germany and from the Eastern European recovery. Both these trends had a positive impact on both profits and the wider business prospects of listed companies. Furthermore, Austria's favourable budget and debt situation compared to the fringes of the EU ensured additional investor interest in the Vienna stock market. After the latest revision of profit forecasts and upside targets, UniCredit analysts now anticipate an ATX at 3,075 points by the year end, with a total potential return of 11 percent.
"The Austrian economic picture has changed little in recent months. The decisive impetus for sustained recovery continues to come from foreign trade", says Helmut Bernkopf, Bank Austria Director, Corporate & Investment Banking. After signs of weakness in summer, the global economy has recovered by winter. At the same time the domestic economy is once again contributing more to economic growth than a few months ago. In 2011 Austria should no longer be so heavily dependent on the global economy's fate. This year economic growth will be at least 2.0 percent greater than last and be based on a pleasingly balanced economic mix. "Austria has a good chance of a self-sustaining recovery," according to Bernkopf, "Not least because the scale of budgetary consolidation is not as great in Austria as in many other euro zone countries."
Accentuation of the debt or spread crisis has without doubt heightened internal economic divergence in the euro area. This has given the ECB's interest-rate policy the massive challenge of steering a middle course between the potential for growth on the periphery and the risk of inflation. At any rate Europe will abandon zero interest rate policy sooner than the USA, to wit towards the end of 2011. Until then the European stock markets should still be able to benefit from the continued low interest rates.
The European stock markets continue to exhibit low price-earnings ratios, a high level of profit growth and attractive yields on dividends. Compared to others, the Vienna Stock Exchange still seems to be valued slightly higher, but at the same time is evincing a faster than expected rate of growth. "In view of the fact that states with structural problems have in many cases had to post a negative profit trend, country allocation is likely to become increasingly important to investors. In our opinion this will benefit the Vienna Stock Exchange", thinks Thomas Neuhold, Manager Share Research Austria at UniCredit. Generally speaking, weaker early indicators make further profit upgrades appreciably less likely. Clear price rises are therefore possible only if valuations increase.
3,075 points as a 12 month target for leading Viennese index
UniCredit analysts currently expect the ATX to be at 3,075 points in 12 months. With profits 35 percent down on the 2007 high, the leading Viennese index still hasn't regained pre-crisis levels, but is continuing its positive upward trend. In 2010 the ATX was one of the few European stock markets with a clear, positive profit forecast. UniCredit's share research is expecting a growth in profits for ATX companies of +26 percent for 2011 and 15 percent for 2012. The profit revision rate is currently almost zero and further profit upgrades are also rather unlikely, even in Austria.
In this environment UniCredit's Share Research Austria recommends AT&S, Erste Bank, Immofinanz, Post, Strabag and Wienerberger. "Despite a sustained positive economic environment, the stock market mood is restrained. Our current portfolio therefore leans towards banking and property securities with a marked Eastern Europe orientation and cyclicals referencing Germany. This way we're prepared to cope whatever the weather." according to Neuhold.
Enquiries: Bank Austria Press Office Austria
Tiemon Kiesenhofer, Tel. +43 (0)50505 - 52819
E-mail: tiemon.kiesenhofer@unicreditgroup.at
Julia Wegenstein, Tel. +43 (0)50505 – 52854
E-mail: julia.wegenstein@unicreditgroup.at
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