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Equity Outlook 2016 SEE Markets: Croatia, Slovenia, Romania, Serbia, Bulgaria

​As the year 2015 is passing by we wanted to use the opportunity to provide an outlook for the next year based on our continuous work and locally gathered insights. Namely, over the past year we organized over 100 meetings with companies in the region which on average represents meeting each company from our coverage at least 2 - 3 times during the year. The primary reason for travelling remains development of trust with the management teams and gathering better understanding of the regional business models. Our “micro-to-macro” methodology examines microeconomic trends in order to better grasp the broad macroeconomic forces affecting business strategy and public policy. All of this enabled us to have the coverage of 5 countries and more than 12 different industries.

This report will interest those who make decisions about allocating resources regionally and those seeking to deepen their understanding of growth and profitability drivers in SEE companies. Broadly speaking, in 2016 the common theme for each country is above 1% expected GDP growth, something that has not been seen since already a fairly distant 2008. This moderate GDP growth is by itself nothing which stands out on a world map but when we couple it with the expected improvement in companies’ results and their strong business models we get a fairly unique region to be invested in. Furthermore, in the report we outline the potential of local asset management industry, dividend expectations of the blue-chip companies and upcoming capital market offerings, all of which add positive flavour to the region.

Another topic which you can’t simply pass by is privatisation. Every now and then there are rumours about potential privatisation of government owned companies with a more or less same negative result. A legitimate question thus remains: is the region ready to make progress in this regard or the market forces pushing for privatisations are losing the battle? Which companies are current candidates for privatisation and what would be the size of potential deals? Regardless if you believe or not in the success of privatisations it is crucial to monitor them as they can tremendously change the overall regional landscape. And thus it is important to always stay ahead and take part in such a change.

From the general demand point of view, 2016 could be a year of plenty. The ECB is conducting its quantitative easing and pushing additional liquidity into the markets. At the same time, Croatian and Romanian pension funds have significant potential to invest into equity.

We certainly hope that by sharing our views on the equity markets and the most prominent regional companies we will further educate and positively influence our clients’ knowledge on the region. We also wish to contribute in sourcing new regional champions which will transform and further spotlight the SEE in the years to come.