According to initial estimates, Austrian GDP didn't fall as steeply in the previous year as analysts had feared. Although the -6.6% slump has been enormous, it took place in sectors that only indirectly have an impact on the Vienna stock market. The recovery of the industrial economy, which has already led to positive growth-contributions from goods exports since the fourth quarter of 2020 and culminated in a three-year high of the IHS/Markit-BankAustria-PMI in February, is however encouraging. The ATX consequently gained in the first two months of the current year and partially offset the shortfall from the previous year. The index has been benefitting from its sectoral composition in favour of energy, industrial, financial, and real estate stocks, which, with few exceptions, are not very sensitive to the cyclical consumption currently weighing on the GDP figures and the current account balance. Compared to international standards the valuation is still below average and there are no signs of a paradigm shift in loose monetary policy, although there has been some correction in long-term yields and inflation concerns have been on the rise. With progress in tackling the pandemic, other sectors like transport, tourism and retail should also eventually recover.
All that could lead to the conclusion that portfolio performance is just a question of high stock quotas. However, those are already in place among large institutional investors. Favourable multiples are more the result of expected earnings than of current conditions. Stock selection is increasingly overshadowed by such fundamental questions as: Where have lockdowns resulted in only short-term disruptions, and where do they conceal long-term structural shifts? Can we expect changes in the service-based economy due to the months-long absence of leisure, travel, and various personal services? Does the mandatory break leave skill deficits, so that in some industries activity can’t be ramped up immediately when restrictions will be lifted? Do other supply-side constraints, as we have seen with semiconductors and chips, exist, that weren’t revealed earlier due to demand deficits? What do consumers ask for in the long run, under which circumstances do they work? Where do they need more, where less space? Such turning points come with enormous chances and risks for the investors. Diversification and professional stock selection, and unfortunately the virus and its mutations, will determine which of them prevail in the individual portfolios.
Author:
Uta Pock
Head of Research
VOLKSBANK WIEN AG
8 March 2021
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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.