There are some interesting tidbits that can be found when looking at the average turnover in Croatia during both the positive and negative periods for the stocks traded. In this brief analysis, we looked at how the turnover of Croatian blue chips developed during these periods, and the main differences.
In order to demonstrate this, we took the CROBEX10 index, which is composed of only Croatian blue-chip companies, and as such is a good representation of the largest public companies in Croatia. Afterward, we looked at the periods in which the index grew, as compared to the previous day. We defined these periods as periods of growth, positive periods, or in financial jargon, bullish periods. The same was done for the times of decline, negative returns, or the bearish period. During these times, the turnover of the Croatian blue chips which compose the index was compared. The data provided is from 2021 to 2023 YTD.
As we all know, both 2021 and 2022 were years that could be described in many ways as polar opposites. While 2021 was a year of recovery and strong growth, not just in the region but also the entire world, 2022 started off relatively well, with just elevated inflation posing a problem, something that will later be tackled with higher interest rates by central banks around the world. However, it only started that way, and everything, most predictions for the year could be thrown out of the window after the Russian invasion of Ukraine, the subsequent sanctions on Russia, the energy price increases, and the record high inflation rates. 2022 proved to be a quite negative year for equity markets, with investors around the world scrambling towards alternative asset classes, from real estate, currencies, bonds, art, and crypto, among many, many others.
In this environment then, how did the Croatian blue chips perform in terms of turnover? Since the end of 2020 (December 29 to be exact) there were 529 total trading days in Croatia. And although the sentiment could have been described as cautious at best, especially considering the low returns (in terms of for example, dividends or even general returns on stocks) in Croatia, as well as the ever-present liquidity issues, if we look at the big picture, the index as a whole actually had more days where it gave positive returns than negative. Of course, this type of analysis excludes one important point: even if an index returns 0.5% for 3 consecutive days, but losses 2% on the 4th day, it’s still a net negative. This is only a look at the general data, and as such should be supplemented with returns on the index/stocks by themselves. In general, the CROBEX10 increased on 286 out of those 529 days and decreased on 243 days. Immediately it is apparent that the index had more “green” days than “red”. In fact, in percentage terms, the index increased 54% of the time, while it declined 46%.
So knowing this, how did the turnover of the Croatian blue chips develop in this period?
Average turnover of CROBEX10 constituents since the end of 2020 (EUR)
Source: Bloomberg, InterCapital Research
As we can see in the graph, there are actually some notable differences in returns during both positive and negative days. Podravka has the largest weight in the CROBEX10 index (currently at 21.35% of the total), and had an average turnover during times of growth of EUR 111.4k, while during negative days, its average turnover was EUR 95.3k. This would yield a difference of 16.9% between positive and negative days. Of course, because Podravka makes up so much of the index, it is expected that when it records a large turnover, especially turnover that pushes the Company’s share price up, it will also have a positive impact on CROBEX10, due to the aforementioned weight of Podravka. The next Company with the highest avg. turnover during positive days is Hrvatski Telekom, with an average of EUR 97k, as compared to EUR 91.7k during negative days, marking a difference of 5.5%. Following them, we have Valamar Riviera, with an avg. turnover during positive days of EUR 89.6k, an increase of “only” 0.8%. Next up, we have Atlantska Plovidba, which by itself is a peculiar share. The Company’s share average turnover amounted to EUR 77.2k during the positive days, and EUR 81.5k during the negative, meaning that its turnover is actually 5.2% higher during the negative days. Does this mean that Atlantska Plovidba’s share price also decreased? Not necessarily. In fact, it increased by 125% in the period, by far the highest out of all CROBEX10 constituents, further demonstrating the point mentioned above, that turnover by itself does not tell us much.
Increase/decrease in turnover on positive days as compared to negative days (%)
Source: Bloomberg, InterCapital Research
There are some other noteworthy companies that need to be mentioned here. Končar and AD Plastik recorded an increase in turnover on positive days as compared to negative days of 16.1% and 15.9%, respectively, even though they record a quite low average turnover compared to other CROBEX10 companies.
So what can all of this data show us? It can show us that cumulatively and over a longer time period, periods of growth will always outweigh periods of decline. This is especially true if we look at a basket of shares compared to individual stocks. What this could mean is that continually investing in a diversified portfolio, no matter the environment (as we can see in 2022), will over the longer time period even itself out, and the positive returns will outweigh the negative ones, as the trend of growth is always present, even on a smaller stock exchange such as ZSE.
