The economy is still dealing with the consequences of the pandemic and some sectors are finding it hard to do so, while the next shock has begun with the war in the Ukraine. Until mid-February, there was the impression that the supply chain problems would gradually be solved over the course of the year. Companies were sure to be able to pass on higher costs – caused by shortages of raw materials and inputs – to their sales prices. That resulted in prolonged inflation expectations, that were expected to lead to a normalization of monetary policy in Europe as well. Shares as tangible assets would continue to be in high demand going forward, the most important requirement for the pass-through of higher costs would be a good competitive position, and value stocks, of which there are lots of candidates in the ATX, would be preferred due to higher present preference.
Austria’s economic relations with Russia and Ukraine as a percentage of GDP are higher than the European average. Accordingly, the Austrian stock index ATX reacted very strongly to the war and war-related financial sanctions. Also, the spread between Austrian and German treasury bonds widened. Due to the imminent shortage of gas (and the more easily substitutable crude oil), a slow down or interruption of the economic recovery and higher inflation rates in the near term can be expected in the eurozone. Monetary policy will still be very accommodative even if the ECB sticks to its tightening course, however, since real interest rates are at record lows. Fiscal policy also provides growth stimulus, either through higher defense spending (e. g. in Germany) or through investments related to the transition to renewable energy which has become even more urgent due to the Russia/Ukraine crisis.
The constituents of the ATX mostly reported good results for the last few quarters, providing a cushion for the current challenges up to a certain point. The average dividend yield of the index reached approx. 4% in March and the PE ratio, based on earnings consensus estimates for 2022, was lower than 10x. Even (or especially?) now, Austrian stocks are thus an interesting complement for portfolios diversified by asset classes and countries.
Author:
Uta Pock
Senior Research Analyst
VOLKSBANK WIEN AG
4 March 2022
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Note
Wiener Börse AG would explicitly like to point out that the data and calculations given in this report are historic values, which do not permit any conclusions as regards future developments or value stability. Price fluctuations and loss of capital are possible in securities trading. The contribution is the personal opinion of the analyst and does not constitute a financial analysis or a recommendation for investment by the exchange operating company, Wiener Börse AG.