RRaiffeisenaiffeisen WWeeklyeekly RReporteport Number 18 May 14th, 2012

Global risk aversion affects Croatian bonds Number of tourist arrivals and Number of tourist arrivals and overnight stays in Q1 exceeded by far the last overnights year’s data. Tourist arrivals rose by 6.1% yoy and overnights by 11.4% yoy. We 1.6 expect growth of physical indicators in tourism in this year as a result of shaky situ- 1.4 ation in Greece (one of our major peers), the fact that for the majority of tourists 1.2 is a car destination, which together with rather low prices of accommoda- 1.0 tion (high portion of private accommodation) is an advantage in the year when 0.8 even strongest economies will suffer a slowdown. PPI data released this week millions 0.6 (+6.2% yoy) indicated that energy prices remain the main driver of inflationary 0.4 pressures (excluding energy PPI grew by mere 1.8% yoy). Namely, as of 1 May 0.2 administratively set prices, such as electricity and gas, are up by 20% and 22%, 0.0 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 respectively. Hence, we expect that CPI growth (scheduled to be released on Tues- Arrivals Overnights day) will intensify to 2.8% yoy (from 2% yoy in March). Sources: CBS, Raiffeisen Research Turning to the financial markets, last week the new reserve requirements main- T-bills yields and ZIBOR tenance period started, meaning that the reserve requirement rate dropped by 8 1.5 pp (from 15% to 13.5%). Consequently, the liquidity jumped to HRK 6.5 bn,

6 whereas around HRK 4.5 bn comes from the lowering of mandatory reserve rate % and the rest is the usual excess liquidity in the recent weeks. Hence, in this week,

4 excess HRK liquidity will keep the money market rates close to their minimum levels. Moreover, MM rates were low even before the new regulation, so we do

2 not expect liquidity shocks. From the FX market stance, since the newly released liquidity is aimed at financing export-oriented programs, loans for these projects 6.1.12 3.2.12 2.3.12 20.1.12 17.2.12 16.3.12 30.3.12 13.4.12 27.4.12 11.5.12 would be counted into the asset liability ratio up to 50%, which means that banks ZIBOR 3M ZIBOR 12M would be left with more EUR. This should in theory neutralize the increased HRK HRK T-bill 3M HRK T-bill 12M liquidity level once the loans are approved. However, should the program for Sources: MoF, reuters.hr, Raiffeisen Research financing export-oriented companies fail, we do not exclude some depreciation 5-year USD CDS pressures on HRK. 650 Last week trading on the FX market was without any excitement. At the start of the 550 week banking sector’s demand pushed the EUR/HRK rate above 7.50. Until the

bb 450 end of the week FX trading hovered around 7.505 kuna per euro. In the coming week we expect trading between 7.49 and 7.53. The start of the tourist season 350 and consequent inflow of EUR together with increased stock of EUR-linked T-bills would provide the support for HRK. On the other hand, foreign deleveraging of 250 domestic sectors, dividend payments to non-residents and foreign trade worsening 9.3.12 6.4.12 4.5.12

16.3.12 23.3.12 30.3.12 13.4.12 20.4.12 27.4.12 11.5.12 would have the opposite effect. Croatia Romania Hungary *Prices as of 11.5.2012, 16:30 Sources: CBS, Raiffeisen Research Global risk aversion influenced Croatian Eurobonds, most notably USD ones, which recorded a decline in prices up to 2.5% dragging the CROATIA 2021 yield Key economic figures and forecast back to 7%. Furthermore, 5y USD CDS rose by 35 bp on a weekly basis to 465 Indicators 2010 2011 2012e bp. On the local bond market focus was on pure HRK papers. Solid demand on Real GDP (% yoy) –1.2 0.0 –1.0 the treasury bills auction and the decline in yields at the beginning of the week Consumer prices 1.1 2.3 2.5 (avg. % yoy)* pushed the HRK bonds up. But despite solid demand, prices of 2016 and 2017 EUR/HRK (avg) 7.29 7.43 7.56 maturities fell on a weekly basis reflecting the spill over of negative sentiment on Official FX reserves 10.7 11.2 12.0 foreign markets. This week will most likely pass without T-bill auction amid modest (EUR bn) maturity. At the last week’s auction, strong demand pushed the yields further south. *under revision. Sources: CBS, CNB, Raiffeisen Research Equity Market

AGM season ahead

Viro (3 m) Trading comment 485 Last week global stock markets posted mainly losses in line with intensified in-

470 stability in Greece after the parliamentary elections. On Thursday the pessimism was a bit cushioned by good US labour market data and the bailout plan for 455 Spanish banks. Zagreb Stock Exchange traced the global sentiment as there 440 were no significant announcements on domestic market and hence equity indices 425 recorded negative returns in all days. CROBEX index closed the week at 1,783.9

410 points, which makes a weekly drop of 2.4%. Out of the CROBEX constituents the strongest weekly surge recorded Ingra (+1.1%), followed by share of Luka .5.12 2.3.12 8

10.2.12 23.3.12 16.4.12 Rijeka, which advanced by 0.9%. Trading volumes were rather low with a daily

CROBEX average at HRK 12.2 million. Sources: ZSE, Raiffeisen Research Company news Many companies on ZSE announced the General Meeting notice. Atlantic Grupa (3 m) scheduled the Annual General Meeting for June, 20. According to the agenda, 525 total profit realized in 2011 amounting to HRK 10.4 million will be allocated to

515 retained profit. Luka Ploče, Luka Rijeka, and Riviera Adria will not pay dividend as well. Viro and HŽ Cargo signed the three-year contract for the trans- 505 portation of the cargo by railway. Hence, Viro will substitute the road transporta- 495 tion of sugar beet, raw and white sugar, molasses and dry briquette chips with 485 railway transportation. The Minister of the Entrepreneurship and Crafts confirmed

475 Government’s intention to sale the state-owned share in , but only after the market conditions improve and the value of the company increase. .2.12 .5.12 8 2.4.12 8 10.2.12 2 15.3.12 19.4.12

CROBEX ATGR This week Sources: ZSE, Raiffeisen Research For the trading on ZSE in this week we expect continuation of low volumes and minimal changes of the indices as there is no incentive from the economy and the situation related to eurozone debt crisis is rather uncertain.

Market performance Top/Flop – CROBEX index Index 1w % ytd % Value on* Share 1w % Price on* Share 1w % Price on* 11.5.2012 11.5.2012 11.5.2012 ATX (AT) –2.84 6.81 2,020 Ingra 1.12 7 Ericsson NT –2.41 1,256 BELEX15 (RS) –1.16 –2.02 489 Luka Rijeka 0.94 151 Đuro Đaković H. –2.73 78 BETI (RO) –6.41 15.89 5,026 Končar 0.20 513 Atlantska plov. –2.86 310 BUX (HU) –3.52 1.41 17,213 Viro TŠ –0.01 450 Belje –3.45 81 Luka Ploče –0.55 720 Institut IGH –4.00 711 CROBEX (HR) –2.43 2.52 1,784 Kraš –1.00 396 Zagrebačka banka –4.03 40 PX (CZ) –1.14 –0.27 909 Atlantic Grupa –1.05 512 AD Plastik –4.44 119 MICEX (RU) 0.44 0.97 3,244 (P) –1.19 224 Valamar Adria H. –4.77 97 SBI20 (SI) –4.17 –1.29 582 Tisak –1.24 198 –5.20 310 SOFIX (BG) 1.20 –4.91 306 Riviera Adria –1.46 12 Vupik –6.87 80 SASX10 (BH) 0.72 –4.19 758 Podravka –1.83 236 –6.88 127 NTX (SEE,CE,EE) –3.14 4.40 961 –1.86 5,790 –7.44 264 WIG20 (PL) –1.95 1.05 2166.99 HT –2.26 202 * as at 16:00 CET. Source: Bloomberg * as at 16:00 CET. Source: ZSE, Raiffeisen Research

2 May 14th, 2012 Impressum

Raiffeisen Research

Raiffeisenbank Austria Anton Starčević, MSc, Chief Economist; tel: + 385 1/61 74 210, email: [email protected]

Economic Research Department Zrinka Živković Matijević, MSc, Acting Head of Department; Fixed Income Market, Macroeconomics, Politics, MM and Exchange Rates; tel: + 385 1/61 74 338, email: [email protected] Ivana Jurić, Economic Analyst; Macroeconomics, MM and Exchange Rates; tel: 01/61 74 349, email: [email protected] Marijana Cigić, MSc, Real Estate Analyst; tel: + 385 1/61 74 359, email: [email protected]

Financial Advisory Services Department Nada Harambašić Nereau, MSc, Chief Financial Analyst; Equity Market; tel: + 385 1/61 74 870, email: [email protected] Ana Franin, Financial Analyst; Equity Market; tel: + 385 1/61 74 388, email: [email protected]

Treasury and Investment Bank Division Ivan Žižić, Executive Director; tel: + 385 1/46 95 076, email: [email protected]

Raiffeisen Invest Renata Gecan Milek, President of the Management Board; Investment Funds; tel: +385 1/60 03 700, email: [email protected] Goran Nušinović, Member of the Management Board; Investment Funds; tel: +385 1/60 03 700, email: [email protected] Marta Meštrov, Head of Sales Department; Investment Funds; tel: +385 1/60 03 750; email: [email protected]

Abbreviations avg – average EUR – Euro kn, HRK – Kuna C/A – current account FC – foreign currency MoF – Ministry of Finance CBS – Croatian Bureau of Statistics FED – Federal Reserve System ON – overnight CES – Croatian Employment Service FI – financial institutions SMP – Securities markets programme CNB – Croatian National Bank GDP – Gross Domestic Product USD – Dollar ECB – European Central Bank GFCF – Gross fixed capital formation eop – end of period IMF – International Monetary Fund

Publisher Raiffeisenbank Austria d.d. Zagreb Petrinjska 59, 10000 Zagreb www.rba.hr tel. ++385 1/45 66 466 fax: ++385 1/48 11 626

Publication finished on May 11th, 2012

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