During January, each of the CROBEX10 constituents noted a share price increase, overall resulting in a CROBEX10 increase of 6.8% MoM and ending at 1,239.61 points.
Since we adopted a new currency, shifting from HRK might distort our perception of actual current prices and consequently, returns on ZSE. So, summarized price changes might help you get a grasp of what a solid month this was for Croatian equity. However, we do emphasize that all of those changes came on a notably lower equity turnover. Nevertheless, the price movement recorded was above expected.
Performance of CROBEX10 constituents (January 2023, MoM %)
Source: Bloomberg, InterCapital Research
Looking at the price performance of all CROBEX10 constituents, we see each one of them in green for the month. The biggest winner (for the month only, of course) is clearly AD Plastik with a double-digit increase of as much as 23.8%. However, we emphasize this kind of return is uncommon and happened due to an exceptionally low base effect, as AD Plastik was strongly impacted by both semiconductor shortage in the EU market and the Russian invasion of Ukraine as the Company has a production capacity located in Russia. AD Plastik is followed by Podravka, which noted also a strong double-digit return of 12.7% in January. Further, a few of the constituents reported a high single-digit return this month. Some of them are Končar, Adris (pref.), Ericsson and Atlantic Grupa with 8%, 8%, 7.4% and 6.6% MoM returns, respectively. Also, HT noted a solid 5.3% MoM increase.
Also, SPAN is more than worth mentioning with a 16.1% share price increase during January. We also note regarding SPAN that the company made prominent YoY performance with an increase in share price by 34.1%, resulting in SPAN being one of the best stocks in the taken period for achieving a solid return. This kind of performance came on the back of solid results with 9M 2022 SPAN’s net profit increasing by 162% YoY on the back of strong sales growth.
SPAN Performance (January 2022 – January 2023)
Source: Bloomberg, InterCapital Research
By the end of 2022, the total NAV of Croatian pension funds equaled EUR 17.5bn, representing a decrease of 0.7% MoM, and 0.9% YoY.
Recently, the Croatian Financial Services Supervisory Agency, HANFA, published its latest report on the state of the Croatian capital market, including the data for the Croatian mandatory pension funds. As this is data for the month of December, we can also see how the pension funds performed overall during 2022. In the report, we can see that the NAV of Croatian pension funds amounted to EUR 17.5bn, which is a decrease of 0.7% MoM, and 0.9% YoY. Furthermore, the net contributions to the pension funds amounted to EUR 96.8m, while during the entire 2022, they increased by EUR 1.09bn.
Croatian mandatory pension funds AUM structure change (January 2018 – December 2022, EURm)
Source: HANFA, InterCapital Research
In terms of the changes by asset holdings, on an MoM basis, all asset classes recorded a decline. The largest absolute decrease was recorded by receivables, which decreased by EUR 95.5m, or 81%, followed by investment funds at a decline of EUR 64.8m, or 3.4%, deposits and cash, which declined by EUR 55.3m, or 6%, and bond holdings, which declined by EUR 45.6m, or 0.4%. Considering the fact that pension funds have positive cash inflows, or rather net contributions into the funds are positive, this would mean that the decline in value of these assets came mainly as a result of the decrease in the value of assets themselves. Also taking into account that no asset class recorded an increase, it would mean that there wasn’t that much shifting between one asset class and another, with a decrease in all of them.
Meanwhile, on a YoY basis, deposits are by far the category that recorded the largest increase, growing by EUR 287.2m, or 50.1%, followed by bonds, which increased by EUR 21.5m, or 0.2%. On the other hand, the largest decrease was recorded by investment funds, which were down EUR 208.4m, or 10.1% of their value, followed by shares, which declined by EUR 205.3m, or 5.5%, and receivables, which decreased by EUR 67.2m, or 75%. As the main function of the pension funds is to maintain and increase the value of the pensions, they switch to less risky asset classes, such as deposits as well as bonds, from the riskier shares/inv. funds make sense. As such, the increase/decrease in the value of these asset classes does not only come from the inherent increase/decrease in their value on the market but also due to the moving of funds by fund managers from one asset class to another.
This of course makes sense, especially in 2022 when we have witnessed a lot of uncertainty and volatility in equity markets across the world, something that increases risk by a lot, making pension funds more averse to investing in these types of assets.
Moving on to the current asset structure of the pension funds, the largest share is of course maintained by bond holdings, at 63.4% of the total, an increase of 0.16 p.p. MoM, and 0.9 p.p. YoY. Following them, we have shares, at 20.2% of the total, an increase of 0.11 p.p. MoM, but a decrease of 0.9 p.p. YoY, and investment funds, which account for 10.6% of the total, a decrease of 0.3 p.p. MoM, and 1 p.p. YoY. Finally, deposits and cash account for 4.9% of the total, a decrease of 0.28 p.p. MoM, and 1.7 p.p. YoY.
Current mandatory pension funds AUM (December 2022, %)
Source: HANFA, InterCapital Research
Lastly, looking at the securities and deposits, domestic bond holdings still accounted for 92.6% of the total bond holdings, remaining roughly the same MoM, while the remaining 7.4% was held in foreign bond holdings. Meanwhile, domestic equity holdings accounted for 60.4% of all equity holdings, representing an increase of 0.94 p.p. MoM, while foreign equity holdings accounted for the remaining 39.6%.