Equities market outlook for Austria in Q3 2011: ATX has some hurdles to clear
- Austria's stock index disappoints in H1 falling by 9 percent; negative cyclical factors and growing risk aversion add to pressure
- Yet stable macroeconomic climate, attractive valuations and strong ties with growth drivers still give reason to be optimistic
- Outlook: UniCredit analysts stick by positive forecast for ATX: 3,200 points in 12 months and potential overall return of 25 percent seem realistic
- Top tips: Erste Bank, EVN, Immofinanz, Austrian Post Office, Strabag and voestalpine
The Austrian equities market produced a below-par performance in the first six months of the year and there are still a few obstacles in the way in the coming months. The equity markets are being affected all across Europe by negative economic factors, high commodity prices, rising inflation expectations, the interest hikes of the ECB and the government debt crisis. While the ATX numbered among the main winners in 2010, the situation has changed in the meantime: following the first six months Austria's stock index is languishing among the worst indices in Western Europe after falling 9 percent. This is the very reason why the specialists at UniCredit are looking forward to a more enjoyable 6-12 months ahead. When it comes to country allocation Austria remains an attractive market in view of its relative macroeconomic stability. Coupled with the good valuations of Austrian equities and the strong ties with the growth engines of the European economy (Germany and Eastern Europe) this gives reason to be optimistic. Consequently, the analysts have upheld the forecast target for the ATX over the next 12 months at 3,200 points along with an overall return potential of 25 percent.
"Even if the ATX has experienced a below-average trading year so far, we assume that dynamics will pick up again in the second half of the year. Amidst the current economic climate in Europe the leading Austrian index should be able to benefit from the relative economic stability in Austria. The close links with Germany and Eastern Europe are also advantageous for the ATX", explained Thomas Neuhold, Head of Equities Research Austria at UniCredit. "As long as the European climate remains unsettled the ATX will naturally find it difficult to escape its surroundings completely and it will have to weather some storms. In the medium term though the upwards trend on the Austrian equities market which began in 2009 should continue", added Neuhold.
"Austria is currently benefiting from being in the heart of the European growth zone. Germany and Eastern Europe are posting above-average rates of growth just now and this creates good conditions for many Austrian companies as these regions represent their main export destinations or core markets. Investors are strongly attracted by the combination of higher earnings growth at companies and the lower macroeconomic risks of Austria", explained Neuhold.
ATX: continuation of earnings growth expected - 3,200 points the 12-month target
In spite of the turmoil on the equities market, UniCredit analysts anticipate the ATX will rise to 3,200 points over the next 12 months. Even if this growth for 2012 appears somewhat optimistic at first glance, the expected earnings for the ATX are only just above the highs from 2007. Equities Research experts at UniCredit predict that earnings growth for 2011 will come in at 40 percent, followed by 20 percent in 2012. However, the downward trend for leading indicators and the government debt problems on the EU periphery are making it increasingly difficult to carry out positive earnings revisions. In view of the difficult climate the Equities Research team at UniCredit sees great potential for Erste Bank, EVN, Immofinanz, Austrian Post Office, Strabag and voestalpine. "The fate of Austrian equities is highly dependent on continued progress being made in Germany and Eastern Europe. Banks, industrial enterprises and real estate firms in particular have strong presences in these regions. Nonetheless, the still unresolved problems of public debt in some countries will keep volatility high. To be prepared for any situation we still recommend companies with high earnings growth as well as defensive stocks and late cyclicals", concluded Neuhold.
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