Covid-19 has hit the Austrian stock market hard. Many Austrian corporate stocks, some of which were already undervalued, were again severely punished in the course of the global spread of the coronavirus and lost up to 50% of their value in March. Meanwhile, many companies have been able to recover and regained large part of their losses. But the market is struggling with structural issues. Sustainability could be one of the key drivers for Austrian (listed) companies in the future.
There are many reasons for the non-Covid-19-related undervaluations: On the one hand, the Austrian stock market is a peripheral market that is not in the spotlight of international investors; on the other hand, some of the corporate stocks are simply not liquid enough for large international investors. Moreover, many companies listed on the Vienna Stock Exchange are structurally classified as belonging to the "Old Economy". Their business areas are solidly managed, but unlike the obviously innovation-driven companies of the "New Economy", they do not attract public and media attention. The strong involvement in Eastern Europe – a major advantage in the "old normal" - is currently rather a disadvantage due to the expected negative economic development, even though this may change relatively quickly again after the Covid 19 pandemic.
And yet, the Austrian stock market has one essential feature that will allow it to score points: For many of the listed Austrian companies, sustainability is an important strategic company goal. Some companies, such as Verbund AG, Lenzing AG or OMV, have taken on a pioneering role in this respect within their industries. As a result, they are placed on corresponding indices, which in turn are bought by sustainability-oriented ETFs. This increases the liquidity of the companies, which has a positive effect on their attractiveness for international investors. Austrian companies thus make an important contribution to the Green Deal of the European Commission and benefit in turn from the fact that they are (again) seen by the international capital market players due to their sustainable acting.
Author:
Ingrid Szeiler
Chief Investment Officer
Raiffeisen KAG
2 June 2020
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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.