Today, we bring you a quick overview of the current situation in the market, as well as how this affected a select group of regional, European, and global indices during 2023 thus far.
Despite the general macroeconomic situation being one that includes inflationary pressures, high interest rates, and various conflicts continuing (Ukraine War) or starting (Israel – Hamas Conflict), 2023 has overall been quite a good year for equity. There is a contrast here as compared to 2021 (the start of the inflationary pressures) and 2022 (the start of the war in Ukraine, and for the majority of the world, the start of interest rate hikes), as the reaction of the markets seems a lot more grounded and in a sense, numb than it was back then. This is the investor sentiment that has been present for the majority of 2023. Despite the central banks around the world not only stating that further interest rate hikes could happen, but that even the current elevated levels will have to persist until inflation gets under control (targeting 2% inflation growth YoY), the reaction was once again, numb.
There is almost a sense of optimism and hope that the situation has to get better and that the current environment isn’t as dire as it seems. In a way, this is true. Examples range from the war in Ukraine not causing an energy crisis in Europe (at least not to the extent that was expected at first) to economies around the world chugging along, instead of spiraling into recessions. Of course, exceptions to this trend exist. Putting this into context, it is not hard to see why despite the situation, the equity market has at least recovered what it lost in 2022. So having all of this in mind, how did regional, wider European, and US indices perform?
Select regional indices performance (2023 YTD, %)
Source: Bloomberg, InterCapital Research
Starting off with the region first, we took a look at indices from Croatia, Slovenia, Romania, Serbia, and Bulgaria. Overall, most of them, excluding Serbia’s BELEX15 recorded double-digit growth, with CROBEX10 leading the way at 29.5%, followed by BET at 26.8%, and SOFIX, at 24.2%. Even SBITOP, recorded solid growth, increasing by 16.4% YTD. This was despite the recent pressure due to the natural disasters (affecting both companies directly, but also insurance and the banking sector indirectly), as well as the new regulation, an example being the tax on total banking assets.
Turning our attention back to Croatia for a second, it is important to note that despite the relatively low liquidity that has been plaguing the Zagreb Stock Exchange for years now, there are some stars that allowed the index to pull through. These include Podravka, with a staggering 78% return YTD, followed by HPB at 71%, Končar at 61%, and Span, at 38%. Taken together, this led to the aforementioned 30% return for CROBEX10, which makes it the 2nd fastest-growing index this year, at least among the select indices here, only behind the Nasdaq Composite.
For Slovenia, growth was supported by NLB (+34% YTD), Telekom Slovenije (+29% YTD), Luka Koper (+23% YTD), Petrol (+18% YTD), and (Krka (+16% YTD), while in Romania, the banking and energy sector in particular, recorded solid growth.
Select European and Global indices performance (2023 YTD, %)
Source: Bloomberg, InterCapital Research
Moving on to the wider European and global indices, the best performance was recorded by the Nasdaq Composite, which increased by 37% YTD, followed by WIG20 at 27%, S&P500 at almost 20%, and DAX, at 18%. Even the much wider European index, STOXX 600, recorded a 9.6% return YTD. The only index which remained roughly the same YTD was the UK’s FTSE 100, which “grew” by only 0.6%. Overall, here we can see a similar trend as in the region. Nasdaq was the fastest to recover, which is to be expected as it is a technology-laden index, which also recorded more profound shocks leading to larger decreases last year. Even other indices such as DAX, recorded solid returns despite the even more challenging situation that Germany is facing. This would primarily pertain to the drop in exports the country has recorded, as well as higher energy prices due to the (at least until recently), Germany’s dependence on Russia for its energy imports.
