After surging for several years, the Austrian stock market corrected this year in line with many other European stock markets (-3.3%) and, after a period of consolidation, is now in an excellent starting position again.
There are currently five main arguments in favour of investing in Austrian equities:
1. The valuations of Austrian stocks are cheaper than those of many other countries in Western Europe and in some cases also in Eastern Europe.
2. The profit growth of the companies is more than intact and, with a rate of approximately +10%, is also higher than in many other countries in the region.
3. Interest among domestic and foreign investors remains high. Investors can indirectly invest in Central and Eastern European markets via Austrian companies that are active in Eastern Europe and have branches there. This is particularly important for investors whose portfolios have limitations pertaining to European emerging markets.
4. The price performance of the ATX also has catch-up potential in absolute terms. The index is currently (6 June 2018) listed at around 3,300 points and is still far away from its high (4,982 points).
5. Last but not least, the actual implementation of the reform of corporate income tax (KÖST) announced by the government, under which undistributed corporate profits no longer have to be taxed, could bring listed companies additional profit growth of between 5% and 10%.
At the moment, equity investors have become somewhat more cautious again due to the recent corrections. Many market participants have recently taken profits and are reserved regarding new investments. Therefore, the market will very likely move sideways in the coming weeks, as favourable prices are also being seized upon quickly. The market is also interesting for US investors again due to the latest development of the dollar.
In terms of sectors, we continue to regard Austrian real estate stocks as particularly interesting. Historically, they have always been cheap, and even today – although they are in great demand – most Austrian stocks are still trading below their book value. This means that they still have catch-up potential compared with real estate stocks in other countries. In addition, a wave of consolidation is currently under way (e.g. BUWOG, Immofinanz), which may be advantageous for shareholders. Financial stocks are also performing very well again after a long dry spell and are the driving force behind the positive development.
Despite the generally very good starting position on the Austrian stock market, active management is the order of the day to prove the strength of equity fund investments over simple index investments. The fund management of Raiffeisen-Österreich-Aktien also focuses very strongly on second-line stocks overall and has clearly outperformed the ATX over a 10-year period. Active fund management works very well, especially in small markets. Because the fewer analysts focus on the market, the greater the chances are that the fund manager will discover the qualities or shortcomings of a company that others do not see. This results in a clear information advantage.
Investments in funds are exposed to the risk of price fluctuations and capital losses.
The published prospectus and the key investor information document for Raiffeisen-Österreich-Aktien are available in German at <link www.rcm.at>www.rcm.at</link>.
Within the framework of its investment strategy, Raiffeisen-Österreich-Aktien can invest primarily (in relation to the associated risk) in derivative instruments. The fund exhibits increased volatility, i.e. the unit values are also subject to significant fluctuations upwards and downwards within short periods of time, and capital losses cannot be ruled out.
Author:
Ingrid Szeiler
Chief Investment Officer
Raiffeisen KAG
13 June 2018
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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.