• York Investment & Finance

Global Markets Overview: Eastern Europe

By Julia Solecka, Analyst at the York IFS Global Market Telegraph

Europe’s ongoing vaccine effort is hampered by delivery delays; M&A activity across the Eastern European region falls 16% in value year on year; Alexei Navalny’s arrest results in countrywide demonstrations.

Pan-European Stoxx 600 has ended the fortnight just over 1.5% lower following an anxious wait for the upcoming Federal Reserve announcement, alongside mixed reactions to the ongoing vaccination effort across the continent. While no major policy changes are expected, investors will primarily be listening for any changes in tone regarding the economic outlook and amount of support given in the form of asset purchases.[i] The first two weeks of January saw volatile stock performance among most Eastern European indexes as investors weighed the positive and negative outcomes of both economic outlook and coronavirus news. Hungary’s BUX Index ended the two weeks at -1.58%, with similar performers being Latvia’s OMX RIGA (-1.28%) and Lithuania’s OMX VILNIUS (-0.69%). Estonia’s OMX TALLINN was one of the indexes which ended on a positive, up 1.45% in the same period.

Similarly showcased through stock market sentiment has been the ongoing saga of vaccine rollouts across the EU and the changing news surrounding the progress made so far. Investors, now more immune to the threat of tighter coronavirus restrictions, were quick to shrug off concerns of limited travel but felt less easy regarding announced delays of both the Pfizer and AstraZeneca vaccines across the continent. Reduced shipments of Pfizer’s vaccine have affected both Europe and North America over the past weeks, with 1/3 of the 27 member states reporting an ‘insufficient’ number of doses. [ii] Poland and Italy were both said to be considering legal action against the US drugmaker, with Poland receiving 176,000 doses - around half of what was expected. [iii]A similar delivery delay has more recently been announced by the UK-based AstraZeneca, with first-quarter deliveries expected to fall to half the original amounts. [iv] Following the setbacks, Hungary has been the first EU member state to approve the Russian Sputnik V vaccine, buying 2 million doses. [v] Vaccine scepticism has also made a dent in the programme’s progress, with Eastern European countries much more likely to be distrusting than their Western counterparts. [vi]

M&A activity across Eastern Europe fell by 16% in value in 2020, down to €60.8m from €72.34m the previous year. The number of deals completed also fell 13% from 1958 to 1705[vii], though the region saw increased deal values in the final quarter, with Q4 being the busiest since 2016.[viii] Romania’s market declined at a much slower rate, with the number of transactions down only 5% and a decrease of 10% in their value[ix], while Poland was the only member to see growth in both areas. An increase of 9.3% in the number of deals and 6.6% in their value was primarily driven by the Iliad’s acquisition of Play Communications and the country’s historic €2.3bn IPO of Allegro, Poland’s e-commerce star[x]. The year, which saw an unexpectedly good stock market performance, was also particularly positive for IPOs, with the Eastern European region saw 26 companies turn public with their total value reaching €4.79bn.[xi]

Alexei Navalny’s return to Russia has resulted in his arrest on the 17th January and subsequent protests erupting across the country demanding his release. Tens of thousands joined the anti-Kremlin protests and at least 3,700 were detained following the standoff with a heavy police presence.[xii] Demonstrations were held across 100 cities spanning 11 of the country’s time zones, with at least 40,000 people (estimated by Reuters) to have been present during the rally in Moscow, of which 1,200 were said to have been detained[xiii]. Tik Tok, a video sharing platform, has also found itself entangled in the conflict following posts in support of the opposition leader promoting the demonstrations. Russia’s media watchdog has warned social media platforms that fail to delete posts encouraging participation will be fined up to 4 million rubles (£39,000), as both unapproved mass demonstrations and the encouragement of people under 18 to take part are banned in the country.[xiv] While the EU has so far refrained from imposing any sanctions on Russia following the opposition leader’s arrest, both the EU and the US have called for the release of both Navalny and the protestors currently detained.[xv]

This article was first published in University of York Investment and Finance Society's Global Market Telegraph (GMT) Edition 14.1 in early February 2021.

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[i] GLOBAL MARKETS-European stocks fall; focus on Fed and U.S. tech earnings | Reuters [ii] Coronavirus: EU anger over delayed Pfizer vaccine deliveries - BBC News [iii] Poland announces it may take legal action over Pfizer Covid vaccine delay | The Independent [iv] EU demands UK Covid vaccines from AstraZeneca to make up shortfall | Financial Times (ft.com) [v] COVID-19 vaccine: Hungary bought Russia's Sputnik V jab because EU scheme 'was too slow' | Euronews [vi] Vaccine skepticism hurts East European anti-virus efforts (apnews.com) [vii] bne IntelliNews - M&A in Central and Eastern Europe fell 16% in value in 2020, says CMS report [viii] Emerging Europe M&A eyes rebound after strong end to year - The Global Legal Post [ix] CMS: Romania’s M&A market shrinks by only 10% in 2020 | Romania Insider (romania-insider.com) [x] Emerging Europe M&A eyes rebound after strong end to year - The Global Legal Post [xi] bne IntelliNews - M&A in Central and Eastern Europe fell 16% in value in 2020, says CMS report [xii] Echoes of Belarus in Russia’s Navalny protests | Financial Times (ft.com) [xiii] Alexei Navalny: 'More than 3,000 detained' in protests across Russia - BBC News [xiv] Navalny protests: Russia threatens TikTok with fines over protest posts - BBC News [xv] EU, US Call on Russia to Immediately Release Navalny, Protesters | Voice of America - English (voanews.com)


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