Eastern Europe’s smaller markets doing better, says East Capital’s Svedberg

East Capital’s chief economist Marcus Svedberg has pointed to smaller Eastern European markets starting to perform better.

If the markets continue to perform strongly, I think you can expect that many of these markets will begin to perform even better. There is a great potential here.

Some of these markets have fallen sharply and are far below the level they were at before the financial crisis. They haven’t recovered in the same way as Turkey or Russia. There are many undervalued, well-managed companies here.

Since June, we have had positive signals from the markets and now venture capital is also starting to enter these less liquid markets. Now that further central bank stimulus measures are on their way, the positive upswing is likely to strengthen further.

What is the difference now compared to the positive numbers we saw at the beginning of the year?

Back then the rally only lasted a few weeks. This upturn is longer and smoother. But we should be aware that we are still only in the early stages and there are still big differences between the smaller and larger markets. Estonia, for example, has been going strong throughout the year, whereas Ukraine is still underperforming. Ukraine is down almost 40 percent this year.

The Serbian stock market is the one that has performed the worst since the financial meltdown. Why?

It had performed very well before the crisis, but afterwards foreign investors left the market and have yet to come back. There were also many local investors in Serbia that had a lot of money invested in the stock market. The stock market was like a casino and it really tanked.

Since then there have not been any positive signs to entice investors back. Growth has been weak and there has not been any obvious reasons to invest.

In recent months, the Athens Stock Exchange has been performing extremely well.

The Greek market is unique. Interventions by the ECB and the general developments on the euro zone have helped the Greek market, which has shown itself to be extremely volatile. When positive news comes from the euro zone, it performs very well and it tends to nose dive when negative news is published.

Do you think that the revaluation of the smaller emerging markets will continue?

Unfortunately I think that the appetite for risk will subside when the global financial
problems come into focus again. What then happens, these markets are likely to fall back again relatively quickly.


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