With the growing uncertainty and deteriorating geopolitical situation hitting the European equity markets hard, SBITOP ended yesterday’s trading 2.7% lower compared to last week, amounting to 995.05 points.

The current macroeconomic situation and the continued geopolitical pressures are weighing hard on the equity markets across Europe. In combination with high inflation rates, the interest rate hikes to combat said inflation, and the coming recession, more liquid regional equity markets like LJSE were hit hard, with the main index declining by 2.7% in a day, ending Monday at 995.05 points. In fact, this is the continuation of the trend that we have seen since the beginning of the year, but especially since the start of September 2022.

On a YTD basis, SBITOP lost 21% of its value. Since the beginning of September, it lost 12% of its value. Finally, on a YoY basis, it lost 15% of its value.

SBITOP and SBITOP constituents’ share price performance (2022 YTD, %)

In fact, looking at the main drivers of this decrease, in relative terms, NLB lost 29% of its value YTD, Krka and Sava Re 26% each, Petrol 21%, Unior 15%, Telekom Slovenije 13%, Cinkarna Celje 9%, Triglav 7%, and finally, Luka Koper lost 5% of its value.

The fact that the major heavyweights in the index (Krka, Petrol, NLB) all lost a significant amount of their value in this period, contributed heavily to the index’s decline. The overall macroeconomic and geopolitical situation is the driver for this, but if we were to look at specific companies, Krka is heavily affected by its business operations in Russia, something that could deteriorate in case of further sanctions, as well as the rouble depreciation, increasing costs on the Group level. Petrol recorded significant losses due to rising fuel prices in the environment where governments imposed regulations, capped prices, and decreased their margins by again regulating the markets which were previously liberalized. NLB recorded solid results for the year but unfortunately is affected by the rising interest rates which are starting to hit the financial sector hard.

It should again be emphasized that the most impactful driver of these declines are conditions and factors that are outside of these companies’ control (with the exceptions of the direct impact on business as in the case of Krka and Petrol), and as such, the decline in the equity is driven by rising interest rates and discount rates which are negatively influencing valuations. So the decline in equity is the same decline that can be seen across equity markets across the world and considering that the Slovenian equity market is one of the more developed in the region, it following these trends is to be expected.