Half of 2022 has already ended and the signs the market gave us were relatively straightforward. The global macroeconomic situation is full of uncertainty (short-term/mid-term speaking), which is expected in times when inflation is peaking. Where will the equity market go, and even more important – WHEN will the change of trend start? One thing is certain – at the moment nobody knows.
Global equity sentiment
The S&P500, the world’s most known index, had its worst H1 since 1970. From the start of 2022, S&P500 lost 18.2% of its market capitalization. Nasdaq reported an even worse situation – a 25.7% YTD decrease. Bottom line – even a passive investor in those indices has had to stomach a 20% / 30% decrease in their portfolio. Naturally, every investor has the same question – when will the economy stabilize? Are we even done yet, or has it just started?
Regional sentiment
When looking at the region, a conclusion about uncertainty is also present. But a decrease in prices lagged a bit and did not happen yet (at least not in amplitude compared to global indices). Still, let’s remember that region, too, is experiencing high inflation. This „little“ detail is crucial – as inflation can not be ignored. The region, just as always, prices everything with a lag to global markets. Regional companies reported solid Q1 results (as no negative impacts were felt so far) and even Q2 results are expected to be bearable. Yet, the market movement was clearly not supportive of this fact – confirming the fact that future uncertainty is high and is being priced in. The majority of regional blue chips reported negative YTD even as they reported solid results with NLB being an exceptional example – NLB noted a strong Q1 that was boosted by the acquisition of Slovenian Sberbank’s subsidiary and still reported -21.3% YTD return.
Global macroeconomic situation
Let us remind ourselves of everything that is currently dictating market sentiment and movement. Inflation started to boil so everything changed. When Covid-19 hit, America’s economy was boosted by „helicopter money“ as quantitative easing was present. But we need to turn the tables around now due to mentioned inflation. The only „detail“ that is different than now. Fed already raised its reference rate from the near-zero zone by 1.75 p.p. to fight the enemy, while ECB is expected for sure to increase by at least 25bps at the next hearing. The even higher increase should not come as a big surprise. The bottom line – it is simple. We have inflation as a long-lasting bull run endured a good few circumstances due to easy monetary policy. Consequently – inflation caught up and central banks already started to increase interest rates as an answer to the enemy that had been in a shadow for a long time. Higher interest rates, which will most definitely slow an economy – that, we are sure of.
What actually is straightforward then?
The divergence of reported results and market movement is a clear and straightforward sign that uncertainty is peaking with inflation. Solid results combined with not supportive market movement is a direct result of market uncertainty being priced in. That is the only conclusion one can come to at the moment from the divergence of market movement and results. To conclude – an apparent negative investor sentiment influenced equity market movement. Even though financial results were solid in a Q1 (especially for a few selected regional gems, like mentioned NLB) and Q2 should be tolerable too, investors started to price in the only certain thing in the market at the moment– uncertainty.
By the end of May 2022, the total deposits in Croatia amounted to HRK 371.5bn, representing a growth of 1.3% MoM, and 9.9% YoY.
The Croatian National Bank (HNB) has published a monthly report on the consolidated financial positions of the monetary financial institutions. According to the report, at the end of May 2022, the total deposits in Croatia equaled HRK 371.5bn, which is an increase of 1.3% MoM, and 9.9% YoY. This marks the 2nd month in a row that the deposits decreased, and if we were to exclude the -0.4% decline in March 2022 (as a result of the geopolitical uncertainty after the Russian invasion of Ukraine), then the deposits would have experienced 2 years of continual growth.
Furthermore, as Croatian households usually hold a higher percentage of deposits than the EU average, and as the deposits are the most liquid form of asset, this makes sense, especially if we consider the high inflation rates and uncertainty when it comes to investing.
Breaking the deposits into their components, on a YoY basis, demand deposits increased by 15.2%, amounting to HRK 157.5bn, while at the same time, saving deposits increased by 6.3% and amounted to HRK 212.1bn. Growth in both of these categories was recorded on an MoM basis as well, with demand deposits increasing by 1.9%, while saving deposits increased by 0.9%.
Taking a closer look at the saving deposits, we can see that saving deposits in HRK decreased by -12% YoY but actually increased by 1% MoM, which is different from the trend we have seen in the last couple of months, where saving deposits denominated in HRK were decreasing, mainly because of the expected switch to Euro at the beginning of 2023. This would mean that they currently hold 13.27% of the total saving deposits, which is a decrease of -2.8 p.p. YoY, but a very tiny increase of 0.006 p.p. MoM. Meanwhile, saving deposits in foreign currency continued their growth, increasing by 9.8% YoY, 0.9% MoM, and ending the month at HRK 185.7bn. This would also mean that currently, foreign currency saving deposits held an 86.73% share in the total saving deposits, which is the aforementioned increase of 2.8 p.p. YoY.
Finally, taking a look at the household deposits by themselves, they recorded growth of 8.7% YoY, 0.2% MoM, and ended May at HRK 250.7bn. This would also mean that 67.48% of all deposits held were household deposits, which is a decrease of 0.74 p.p. YoY, and 0.75 p.p. MoM.
Croatian deposits breakdown (November 2012 – May 2022, HRK bn)
The approved buyback of a maximum of 80,797 own shares, representing 10% of the share capital of Cinkarna, will last for a period of 12 months, starting from 18 June onwards.
Cinkarna has announced to its shareholders that the Supervisory Board and Management Board of the Company adopted the share buyback program of that Company, on the 7 July and 1 of July respectively. On GSM held on 15 June 2022, the Management Board of the Company was authorized to acquire treasury shares for a period of 12 months, from and including 18 June 2022 onwards.
The approved buyback of a maximum of 80,797 own shares will last for a period of 12 months. The price at which the shares can be purchased cannot be under EUR 140 per share or above EUR 290 per share. Consequently, after the approved share split, the purchase price may not be lower than EUR 14 or above EUR 29 per share. You can read more about Cinkarna’s share split here.
The company will keep the public regularly informed of any share buyback transactions within the mentioned deadline of 12 months.
As of the announcement date, Cinkarna holds 26,465 own shares, which represents 3.3% of the share capital.