Croatia has a new Prime Minister and a new government

Tihomir Oreskovic, Croatian Prime Minister (©PAP)

BUX, the Budapest Stock Exchange index, was up 40 per cent in 2015

A new tax on Polish banks threatens their credit ratings and profitability

Who will buy Kulczyk’s Ukrainian assets?


On January 22nd, the parliament gave a vote of confidence to the government led by non-partisan Tihomir Oreskovic. He is a Croatian-Canadian entrepreneur and a former CEO and Chariman of Pliva (a pharmaceutical company). He worked as a manager and CFO in several companies.

The new government consists of 20 ministers. The head of rightist HDZ Tomislav Karamarko became the first Deputy Prime Minister, and the head of the party of independent lists Most Bozo Petrov became the deputy Prime Minister. The new government has been voted two months after the election

What are the tasks for the new Prime Minister? As the AFP lists: first of all – curbing public debt, which has reached 90 per cent of GDP, at second – attracting investors to Croatia as it emerges from six years of recession, at third – “to grapple with the continued influx of refugees travelling through the Balkans from Greece in bitterly cold winter weather on their way to Western Europe, in the region’s worst migration crisis since World War II”. “I am ready to take over the challenges… We should be ready to make difficult decisions,” Oreskovic told the parliament in Zagreb.

Croatia with about 4.2 million people joined the European Union in 2013, and, as for now, is one of the poorest performing economies within the block. The economic growth expected in 2016 (by the national bank of Croatia) is 1.8 per cent.



In 2015, the leading index of Budapest Stock Exchange (taken over by the Hungarian central bank a few months ago) gained 40 per cent and “thus it ranks among the global top five best-performing exchanges in terms of the share price increase of listed companies,” says the press release of the Economy Ministry. In nominal terms this growth means that the BUX index increased from 15 600 in mid-January 2015 to above 23 500 by the end of April. This is due to various factors: the general improvement of Hungarian economic outlook (higher GDP estimates, significant drop in CDS and interest rate bonus, upgrade to positive credit rating outlook) and the expected upgrade to investment category at the beginning of next year etc.


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Moody’s rating agency warns the tax, which from February will charge banks 0.44 per cent of adjusted assets a year, would cost the sector an estimated EUR1bn during 2016. “Such a decline in net income would reduce banks’ ability to absorb shocks. The tax also threatens to hurt credit growth because it reduces banks’ capital creation, which risks adversely affecting Poland’s economy and resulting in slower GDP growth, ” says Moody’s in its press release. The reports that shares in some of Poland’s largest banks, including PKO Bank Polski, fell. “The MSCI index of Polish banks is down about 18 per cent since October, and last week fell to its lowest level on record,” writes The rating agency also points out that the banks are facing challenges from the FX mortgage loans conversion. Last week it warned it could “weaken the banking sector to an extent it would not be able to provide financing to the Polish economy and could result in a downgrade of the country’s rating.”



An interesting article about the Ukrainian part of the business of Jan Kulczyk, Poland’s wealthiest entrepreneur, who died in July 2015. His company Serinus Energy announced December 23rd, 2015 that it will sell its 70 per cent of the shares of KUB-Gas Hilding Limited (KHL), a natural gas producer, of which subsidiaries own 100 per cent of and operate the six licences/permits in Ukraine (containing the Olgovskoye, Makeevskoye, Vergunskoye and Krutogorosvskoye gas fields). The cost of transaction is USD30m “plus working capital and inter-company adjustments”.

Polish business daily, Puls Biznesu, writes that the buyer will be Burisma Holding, the Cyrpus-registered company that belongs to Mykola Zlochevsky, an Ukrainian oligarch and a close colleague to the former Ukrainian Presinent Viktor Yanukovych. The journalist from Puls Biznesu reminds that in 2014 the former Polish President Aleksander Kwasniewski was a member the board of Zlochevsky. He also cooperated with the Kulczyk’s international investment house – Kulczyk Investments (KI, the company that controls Serinus Energy).

At the same time, the second owner of Serinus, a Texas-based company Cub Energy that holds 30 per cent stake, informed it’s going to exercise its right of the first refusal to buy the remaining 70 per cent stake in the Ukrainian company.

So who will buy Serinus’s assets? The deputy CEO of Serinus Jakub Korczak says Puls Biznesu that it doesn’t make a difference who bill buy it. The priority is to sell these assets, because “during the course of 2014 and 2015 the government of Ukraine introduced a series of laws and regulations that have had a material adverse effect on KUB-Gas’ business. Effective August 1st, 2014, the nominal royalty rates on natural gas increased to 55% from the previous level of 28%. Those nominal rates are applied to prices set periodically by regulators which are based on the cost of imported gas. Other legislation placed restrictions on the gas market, causing realized prices in the private sector to fall significantly below those regulated prices, resulting in effective royalty rates as high as 64%,” explaines Serinus.


What’s up in indexes?

BUX (of Budapest) dropped by 0.53 per cent decreasing from 23357.24 index points Friday, January 22nd to 23234.03 index points Monday, January 25th. From year-end it lost 2.87 per cent.

BET (of Bucharest Stock Exchange) decreased from at 6382.31 index points Friday to 6257.50 index points Monday, January 25th. So it dropped by 1.96 per cent d/d and by 10.63 per cent from year-end.

PX (of Prague) dropped by 0.33 per cent d/d and by 7.58 per cent from year-end. On Monday, January 25th it closed at 883.85 index points. The previous close was at 886.77 index points.

WIG20 (of Warsaw) was up 0.14 per cent Monday, January 25th, closing at 1729.62 index points. Friday’s close was 1727.22 index points. And from year-end the index lost 6.97 per cent.

OMXT (of Tallinn) was up 0.37 per cent Monday, January 25th, closing at 877.79 index points. The previous close was 874.54 index points. From year-end OMXT lost 2.36 per cent.

OMXR (of Riga) decreased from 594.25 index points Friday, January 22nd to 589.85 index points Monday, January 25th. So it dropped by 0.74 per cent d/d and by 0.76 per cent from year-end.

OMXV (of Vilnius) increased from 480.62 index points Friday, January 22nd to 481.09 index points Monday, January 25th. So it grew by 0.10 per cent d/d but dropped by 1.01 per cent from year-end.

SAX (of Bratislava) was up 0.15 per cent on Monday, January 25th, closing at 303.69 index points. Friday’s close was 303.24 index points. Form year-end the index’s up 3.88 per cent.

SOFIX (of Sofia) decreased from 444.46 index points Friday to 443.91 index points Monday, January 25th. So it lost 0.12 per cent d/d and 3.69 per cent from year-end.

UX (of Kyiv) lost 0.08 per cent d/d and dropped by 3.92 per cent from year-end. On Monday, January 25th it closed at 658.99 index points. The previous close was at 659.50 index points.

CROBEX (of Zagreb Stock Exchange) dropped by 0.42 per cent falling from 1604.20 index points Friday, January 22nd to 1597.47 index points Monday, January 25th. From year-end it dropped by 5.45 per cent.


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