Q1 2024 turned out to be an amazing equity quarter, with several regional and global indices reaching their all-time high values. In this quick overview, we’ll look at these indices, as well as regional blue chips and how they performed.

Starting off with indices, we selected a group of regional, European, and global indices.

Q1 2024 performance of select indices (Q1 2024, %)

Source: Bloomberg, InterCapital Research

Q1 2024 continued the solid growth that many indices have recorded, with some of them such as BET, CROBEX10, SBITOP, S&P 500, and others reaching their all-time high values during this period. There are many reasons why this happened, but the most important would be the following: firstly, the fact that inflation has largely cooled off across the board, and while it remains elevated, this reduction has led to better investor sentiment. Due to this reduction, we come to the second reason, i.e. the fact that there is an expectation of interest rate reductions, both in Europe and the US. Of course, the geopolitical situation still remains uncertain, but it would seem that for now many of the conflicts remain contained. Lastly, certain companies, such as Nvidia or other tech companies in the US, Končar or HPB in Croatia, NLB, Petrol, Telekom Slovenije and Krka in Slovenia, and BRD, OMV Petrom, and Banca Transilvania in Romania, have all driven the gains for their respective indices higher.

This has led to SBITOP recording over a 16% increase in Q1, BET recording almost 11%, CROBEX and DAX between 10.4% and 10.6%, respectively, while S&P 500 recorded a little over 10% growth.

Performance of select indices since the beginning of 2023 (2023 – 2024 YTD, %)

Source: Bloomberg, InterCapital Research

We can also see this trend over a longer time period, with Hungary’s BUX recording a 54.6% gain since the beginning of 2023, and the NASDAQ Composite recording 54.5%, while all other indices recorded significant double-digit gains, with only Austria’s ATX on the lower end at a 12.8% gain. It should also be noted that these increases are just index-related, and do not include the dividends that were paid out, which would for SBITOP and BET for example add another 5-7% gain.

Moving on to the region, for Croatia, the gains have been stellar both since the beginning of 2023 and in Q1 2024.

Performance of Croatian blue chips since the beginning of 2023 (2023 – 2024 YTD, %)

Source: Bloomberg, InterCapital Research

The top performer both since the beginning of 2023 and in Q1 2024 has been Končar, with growth of 122.6% and 39%, respectively. The Company has been on the fast track in terms of results, recording continued growth across both its top line and bottom line. Combined with guaranteed contracts for the next several years (backlog) and the Green transition which will be a further growth driver for Končar, the market sentiment has been extremely positive for the Company.

Performance of Croatian blue chips in Q1 2024 (Q1 2024, %)

Source: Bloomberg, InterCapital Research

A similar story can also be seen with HPB, with the Bank recording gains of 98.2% and 26.2% since the beginning of 2023 and in Q1 2024, respectively. As with other banks in Croatia and the region, HPB benefited significantly from the higher loan interest rates due to the ECB deposit interest rate hikes, as well as from higher cash held in the form of deposits at the Central Bank. Combined with the consolidation of the Sberbank subsidiary/Nova hrvatska banka into the HPB Group, this led to increased market share and significant negative goodwill. All of these things can then be reflected in the share price. One other company worthy of mention is Podravka, which was actually the top performer in 2023, with an 87% gain until now, albeit the Company did record a slight share price decrease of 1.8% in Q1 2024. However, this came due to investors selling their positions in the Company after this strong price appreciation, and given that if we look at the multiples the Company is above its peers, this was expected. Fundamentally, the Company’s results are solid.

Moving on to Slovenia, growth was also recorded across the board, with NLB taking the lead both since the start of 2023 and in Q1 2024.

Performance of Slovenian blue chips since the beginning of 2023 (2023 – 2024 YTD, %)

Source: Bloomberg, InterCapital Research

NLB recorded a 70% gain since the beginning of 2023, and a 29% gain in Q1 2024. The bank has been on a roll during this period, mainly as a result of significant improvements in its top and bottom line, lower than expected risk, contained costs, continued development of loan & deposit portfolio, and most importantly, the recently announced decision to increase the dividend payment to EUR 11 DPS (previously: EUR 6.5 DPS) in 2024. This also increases the DY to over 10% at the current share price, and an even higher dividend could be expected in 2025. Moving on, Telekom Slovenije also recorded improvements in its financials, but its share price growth was supported by the dividend, as well as the rumors that the Company is considering a sale of its infrastructure.

Performance of Slovenian blue chips in Q1 2024 (Q1 2024, %)

Source: Bloomberg, InterCapital Research

Other noteworthy gains include Luka Koper, Petrol, Sava Re, and Krka, with Luka Koper recording growth due to the development of its business operations and significant improvement in its profitability, Petrol recorded recovery of its profitability after regulations in Croatia and Slovenia hampered its in 2022 and part of 2023. Sava Re also continued to grow its operations, and the impact on the Group of the summer floods and natural disasters in Slovenia in 2023 was not as large as expected. Finally, Krka is the most traded stock on the Ljubljana Stock Exchange, and given that it recorded continued and stable growth across all of its markets, the investor sentiment and demand for the Company’s shares reflected that.

Finally, taking a quick look at Romania, the BET index outperformed most indices in the world in 2023, and this growth continued in Q1 2024 as well. While the index itself is varied with sectors ranging from energy, and banking to food, industrials, real estate, etc., most companies recorded growth, with the only decline recorded by Fondul Proprietatea since the beginning of 2023. However, this decline was more of a value adjustment after Hidroelectrica, Fondul’s largest holding was listed on the Bucharest Stock Exchange, and the proceeds from the IPO were used to pay a significant dividend. For the remaining companies, growth came for many reasons: positive macroeconomic developments as well as sector and company-specific changes. For example, BRD and Banca Transilvania both benefited from the same factors as did HPB and NLB. Smaller index members (by weight) such as Transport Trade Services, Sphera Franchise Group, and Aquila actually recorded triple-digit growth since the beginning of 2023, while they recorded more tempered double-digit growth (and single-digit for TTS) in Q1 2024.

Performance of Romanian blue chips since the beginning of 2023 (2023 – 2024 YTD, %)

Source: Bloomberg, InterCapital Research

The sectors these companies work in are logistics, food/franchise, and industrials, respectively, and they were all able to expand their operations and improve their financials.

Performance of Romanian blue chips in Q1 2024 (Q1 2024 YTD, %)

Source: Bloomberg, InterCapital Research

Overall, it could be said that for all of these companies and countries, the negative sentiment following the start of the war in Ukraine, the elevated inflation, and interest rates had a stronger negative effect on the share price, irrespective of the company-specific fundamentals. While some companies were hit harder than others, decreases were recorded across the board. Beginning in the 2nd half of 2023 and especially in Q3 however, the situation largely changed as the sentiment shifted towards a more positive outlook. With inflation cooling off, recessions for the most part being avoided or not being as bad as expected, and the expected interest rate reductions, investors flocked to equity to catch the wave of recovery (and growth). All of these factors combined led to a solid equity performance in 2023, and this development continued in Q1 2024.