Red-hot Montenegrin market draws warnings

Red-hot Montenegrin market draws warnings

In August alone, some shares grew by 100 per cent, while the buying frenzy boosted the market capitalization to more than 2 billion euros (2.57 billion dollars), or 110 per cent of the nation's GDP.

While experts insist that Montenegro has good investment opportunities, they warn laymen against indiscriminate buying.

"This market can't absorb the huge interest, so the interest also spills over to companies with a less than certain outlook," said Esad Zaimović of the Hipotekarna Bank.

The cooling-off may have already started after weeks of red-hot growth, at least partly because of Sunday's parliamentary election, the first in the newly independent Montenegro which according to polls will see incumbent Prime Minister Milo Đukanović hold onto power.

"We finally see some declining prices, two per cent here, five there," Zaimovic told Deutsche Presse-Agentur in Podgorica. If the trend should continue, some greedy, mostly amateur investors could be face a rude awakening.

A local report recently told a story of a man who sold his Podgorica home for 30,000 euros a year ago and has since doubled his money, as well as the money his friends, acquaintances and their friends and acquaintances meanwhile entrusted him with.

But an undetermined number of those lured by the tales of "sure" profit who have jumped onboard since independence could end up with withering shares instead of homes or life savings.

Some will end up with tough debts, after raising credit approved especially for share-trading, with an annual interest rate of 16 per cent.

"I recently heard someone say that he knows somebody who is excellent at 'guessing shares,'" the daily Vrijeme said in an economic column. "For God's sake, it's not a casino!"

The column was intended for would-be investors who, unused to being burnt by bad investments, snap up whatever shares are available, often without even looking into the actual or prospective business figures.

Concluding the plain-language A-Z of what not to do with money, Vijesti concluded: "In many cases here, whoever buys last will be the fool - try making sure you're not that fool."

Though bombastic, the gambling-like aspect of the Montenegrin capital market is much smaller than the typical, tedious business conducted by serious players, including foreign, mostly Croatian and American, and local investors, many of them also small-time.

Those looking for safe, if not spectacularly profitable shares look for the local equivalent of blue-chip firms, as Telekom, tourism firm Budvanska Rivijera, beverage makers Trebjesa, Niksic, Plantaze, the KAP aluminum combine and some others.

Investors with those shares are far less likely to be unpleasantly surprised after Sunday's election and are certain that their money is safe in the longer run, even if the prices do slide somewhat.

"I expect a market correction regardless of the outcome, gradual if Đukanović wins and dramatic if the opposition wins," said one investor. "In any case, I sold most of my positions and will repurchase after the poll."

Surveys predict no change of power in Montenegro, giving Đukanović and allies 45 per cent of the votes. Even short of an absolute majority, he should be able to remain in office by expanding his coalition to include one of the smaller available parties.