Relative strength is a common citation in finance; many asset allocation strategies attempt to create strategies that exhibit some relative strength due to the well-known fact that prosperous markets attract cash inflows. The viennese market suffered a lost year in 2014, as the incidents in Russia cast dark clouds over the prospects of many Austrian companies. This trend reversed in 2015; the local market developed relative strength which is likely set to continue through 2015.

The takeover discussions surrounding Conwert and Immofinanz shed light on the Vienna Stock Exchange this year, increasing the attraction to international investors; and while the Austrian banks might still encounter further problems in future, they certainly seem better fit for the years ahead than they were previously. The path to solve current problems is clearer; communication with investors seems to improve as well. The development of the financial sector is highly important due to its heavy weighting within the Austrian Traded Index.

With interest rates set to remain low in the eurozone (notwithstanding recent volatility), and Vienna still being a main underweight for international investors, the prospects of sustained outperformance of the Austrian stock market seem bright. Whatever the risk tolerance of investors, opportunities are abound in Vienna: aggressive investors might make a wager on Raiffeisen International or Immofinanz – both stocks trade markedly below book value of equity and price extremely negative scenarios that we consider highly unlikely. Value investors on the other hand know that making bold moves and being patient is likely to yield attractive returns in the medium- to long-term, being well aware of the difficulties around perfect market timing. Defensive investors might consider a position in Post or BUWOG, each yielding more than triple the return of long-dated government bonds.

Alois Wögerbauer, CIIA
Executive of 3 Banken-Generali Investment-Gesellschaft m.b.H.
29 June 2015


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.