“In the first scenario, the price losses would be largely priced in. The sentiment would reverse in 2009 and positive performance would be feasible of up to 15-20%. In the second scenario, the valuation ratios reached would still not be favorable. In the best of cases, performance for 2009 would be zero or negative once again,” explained Fritz Mostbök (photo), Head of Group Research, reads an analysis report remitted by Erste.

In general, the stock markets are at historically attractive levels, but there are also sharp revisions of earnings and sales revenues.

Preference should be given to the markets in the euro area over US markets, and the higher spread of 780 bps, which results from the earning yield versus yield on 10-year government bonds, also favors European stocks. Overall, Erste Group analysts see a short-lived countermovement in 2008 should the currently extremely environment on the markets stabilize temporarily.

“Fundamentally, the much higher returns, for example earning yields, indicate a preference for European equities, especially for Austrian stocks over 10-year government bonds. In Austria, this spread is an amazing 1300 basis points despite the earnings revision already carried out. Unfortunately, no one is really interested in this right now. However, a time will come again when investors will remember the fundamentals”, said Fritz Mostbök, Erste’s Head of Group Research.

Vienna Stock Exchange and its leading index, the ATX, have come under enormous pressure as a result of the global crisis. The ATX index has been underperforming since the beginning of 2008 as compared to other international benchmark indices.