Croatian Equity Market in H1 2020

The first half of 2020 could be described with one word – Coronavirus. The outbreak of the virus led to 2 eventful quarters on the Croatian equity market and therefore we decided to present you with a brief overview of the most significant events in H1.

The Croatian equity market observed a sharp increase in liquidity mostly caused by the selloff in late February and March coupled with increased trading in April, with total equity turnover amounting to HRK 1.97bn (EUR 260.3m). This translates into an average daily turnover of EUR 2m (+85%).

As visible from the graph below, CROBEX recorded a sharp decrease of 19.6%, ending H1 at 1,621.55 points. It is worth noting that such performance is lower compared to other regional markets (Slovenia, Romania, Serbia).

CROBEX Performance in H1 2020

Average Daily Turnover in H1 2020 (EUR m)

In H1, CROBEX observed a solid increase in volatility, especially from late February until end April (average change -1%, standard dev. 2.9%). During this period, we observed some of the best and worst performances of the index in its history. On 12 March CROBEX plummeted, recording a daily decrease of 10.18%. Consequently, after roughly 15 minutes in the trading day, Croatian Financial Services Supervisory Agency (HANFA) temporarily suspended trading on the ZSE until the end of the trading day. ZSE rules and Capital Market Act state that regulator may close ZSE in the case of extreme market volatility in order to protect investors. Note that the index observed such a sharp daily decrease only once in October of 2008 when CROBEX dropped by 10.2%.

Daily changes of CROBEX in H1 2020 (%)

Of the Croatian Blue Chips, most observed a double-digit share price decrease, with Atlantska Plovidba leading the list with a 41.87% decrease. Next come Tourist companies – Valamar Riviera and Arena Hospitality Group, which observed a decrease of 33.85% and 29.73%, respectively. This does not come as a surprise, given that Tourism sector is one of the most affected sectors by the Covid-19 pandemic. On the flip side, companies like HT (+1.14%) and Atlantic Grupa (-4.62%), did not observe such a high drop, given the industries they are in were significantly less affected.

Share Price Performance of Selected Croatian Companies H1 2020 (%)

TNG Came out on Top

It is definitely worth pointing out that despite the crisis, TNG observed a very solid share price performance of 11.23%, ending H1 at 52.5 per share. To understand such a share price performance, one must understand what happened with oil prices in H1. As a reminder, in late April, the oil market witnessed a never before seen event in its entire history, which is the price on the futures contract for West Texas crude, went into negative territory of USD – 37.63 a barrel. Since the pandemic led to a global economic halt, there was already much unused oil stored that American energy companies have run out of space to store it. It is important to note that the settlement of the futures contract, would involve a physical delivery of the oil, which comes with a burden of high carrying costs and the current low demand and almost no place of storing it. Such situation led to a selloff, which resulted in the WTI futures contract ending up in negative territory.

Such a situation led to an increased demand for tankers intended to be used for storage of oil, as big energy traders would have been able to take advantage of a market structure called contango, a situation where the futures price of a commodity is higher than the spot price. By buying oil cheaply now and selling at a higher price in the future market, traders can make money as long as the difference is greater than the cost of storage. As a result, tankers were in great demand, which caused their spot prices to skyrocket.

Tankerska Next Generation is expected to benefit from the current market situation, however to a certain extent. The reason for this is that TNG focuses their vessel employment on time charters which produce steady cash flows, thus reducing the risk of market uncertainties. As a result, most of their vessels are already employed through time charters with an extension option.


Company’s dividend policy to a certain extent reflects the confidence to generate projected earnings and cash flows. Therefore, if companies lack or reduced their confidence of generating their projected earnings, they might revisit their dividend policy or reduce the dividend payment. The Covid-19 outbreak has definitely had a negative effect on most companies projected earnings, which in turn led to a vast majority of Croatian companies deciding not to payout a dividend in 2020. Banks, for example, were required by the CNB to retain 100% of their 2019 earnings to secure their liquidity.

Of the CROBEX constituents, Two food companies, Atlantic Grupa and Podravka decided to payout a dividend. HT also decided to payout HRK 8 per share, which implied the highest yield of all (4.9%). Ad Plastik also paid out an advance dividend of HRK 4 per share.

Dividend Per Share (HRK)

Dividend Yield* (%)

*compared to a the share price a day before the announcement date

Dino Durrigl
Category : Blog

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