Local Equity Emerges Victorious: The Hard-Fought Battle for Recognition

Today we present you with both regional & global equity performance, as already half of the year is up! This article aims to highlight the impressive performance of regional stock exchanges in the face of global competition. We will look at companies contributing to the outperformance of local equity indices.

In the first half of 2023, regional stock exchanges demonstrated their resilience and competence as they outperformed global benchmarks such as the S&P 500 and NASDAQ. While the magnitude of the gains may not have been astronomical, the consistent upward trajectory of local equity indices showcases the remarkable performance of regional markets. Overall, even with an economic landscape characterized by uncertainties, equity stood its ground and delivered solid returns.

As can be seen from the graph below, we can see that regional & global equity noted a strong divergence in development with solid double-digit gains during H1 2023. This is the reason we always emphasize investors should be long-term owners of profitable businesses, able to generate positive cash flow.

Selected Regional & Global equity indices performance (H1 2023)

Source: Bloomberg, InterCapital Research

Below, we present you with a more detailed overview of the regional equity market, presenting you with companies that contributed to its strong performance in the first half of 2023. First, we will take a look at the Croatian equity market and look at each CROBEX10 constituent to gain an overview of their performance during the first half of the year.

H1 2023 performance of CROBEX10 constituents

Source: Bloomberg, InterCapital Research

Moving on to the performance of CROBEX10 constituents, 9 out of 10 constituents noted a positive price development. And not just a positive one, but a strong double-digit increase for most of them. The best-performing stock by far was Span – taking the throne with as much as 69.2% growth in share price during the first half of the year. Besides price development, we emphasize that Span noted a strong increase in liquidity on ZSE, being the most traded stock in H1. We are glad that investors recognize quality companies on ZSE. Span is followed by Podravka and Končar, who also noted a strong double-digit increase of 36.7% and 31.5% in share price, respectively. The share price increases came on the back of solid Q1 results. During Q1, Podravka recorded a solid double-digit increase in the top line of 13% YoY, supported by growth in the Pharma segment (+41% YoY), spurred by the Eastern European market. Further, Podravka also managed to increase its margins on all profitability levels. Končar also reported a good quarter. Its normalized margins slightly suffered due to pressure from an increase in material costs, but the company managed to increase its backlog on the ATH level, which offers rock-solid reinsurance. Also, almost every other CROBEX10 constituent reported a double-digit increase with only Ericsson NT being in the red with a 7.6% share price decrease.

H1 2023 performance of SBITOP constituents

Source: Bloomberg, InterCapital Research

Looking at the Slovenian main index on LJSE, similar developments can be seen. Again, 8 out of 9 constituents were in the green. Krka, the company with c. 1/3 of SBITOP weight, increased by 26.1% during H1. To put in today’s economic perspective, we find Krka’s balance sheet to be advantageous in this period of higher interest rates while its business model is strongly positioned to achieve further market expansion in the future. Besides Krka, two other heavyweights in SBITOP also noted a double-digit growth, this being Petrol and NLB with 20.5% and 17.9% increase, respectively.

However, we would like to emphasize that looking at both regional stock exchanges, the mentioned developments came on the back of lower liquidity, which might indicate elevated investor caution.

H1 equity turnover on ZSE (H1 2013 – H1 2023)

Source: ZSE, InterCapital Research

H1 equity turnover on LJSE (H1 2013 – H1 2023)

Source: LJSE, InterCapital Research

Domagoj Grčević
Category : Blog

Want to invest? Do not know how and where? Contact us and we will solve everything for you.