With 2021 being a year of strong recovery compared to 2020, we decided to bring you an overview of how 2021 turned out for regional stock exchanges, by looking at the average daily turnover in equity.

With 2021 over, it is useful to look back at how the year turned out for regional stock exchanges. Their performance for over a decade (since the 2008 financial crisis) has often been cited as lacking as a result of low liquidity and turnovers that have been declining over the years for some of the countries like Serbia. This is not the case in bigger, more global stock exchanges, especially when we take into account the economic growth over the last decade. There are some outliers in this trend, however, as in some years, there were IPOs or specific local circumstances that drove the trading activity in a positive direction. To see all of this data, we compiled the average daily turnover for the regional stock exchanges in the graph below.

Average Daily Turnover of Regional Stock Exchanges (2013 – 2021, EURm)

As can be seen, the Bucharest Stock Exchange is leading the way in terms of turnover, with a daily average turnover of EUR 15.87m in 2021 (a total turnover of over EUR 4bn), which is an increase of over 56.4% over 2020. This is quite interesting to see, considering that for most other regional stock exchanges, they had either a slight or a major increase compared to 2020. This can be attributed to the massive amount of uncertainty stemming from the COVID-19 pandemic, which drove high volatility and sell-offs (especially in March 2020, when the first restrictions were announced), which contributed to a large amount of turnover in 2020. In 2021, the aforementioned increase comes on the back of the strong recovery experienced during 2021 by the country, the inclusion of the Romanian capital market into Emerging Market, as well as the increased number of listed companies through IPOs on the Exchange.

Next up, we have the Ljubljana Stock Exchange, which had an average daily turnover of EUR 1.51m in 2021, a 4.6% decrease compared to 2020. In total, this would amount to EUR 379.96m, out of which, EUR 60.63m was block turnover. If we were to look at the turnover without block trades (EUR 319.17m), we could see that several stocks (Krka, with a turnover of EUR 148.1m, NLB with a turnover of EUR 50.4m, Petrol with a turnover of EUR 26.7m, Sava Re with a turnover of EUR 22.9m, and Triglav with a turnover of EUR 20.3m) made up the majority (or app. 84%) of the turnover.

Top 10 most traded stocks on the LJSE in 2021 (EURm)

Following them, we have the Zagreb Stock Exchange, which in 2021 had a turnover of EUR 330.2m had an average daily turnover of EUR 1.32m. This is a decrease of 13% YoY, and this can also be attributed to the high volatility and trading volumes in 2020, which did not repeat as much in 2021. If we were to take block turnover and debt/bonds out of the total turnover, it would amount to EUR 237m. This would mean that the top 10 most traded companies (Podravka, HT, Valamar Riviera, Atlantska Plovidba, Adris Grupa, Ericsson NT, Atlantic Grupa, Optima Telekom, Končar, and AD Plastik) would make up 66.2% of the total turnover on the Exchange. On Croatian equity market there was one IPO and two additional listings, while eight shares were delisted from Zagreb Stock Exchange. Only top 20 shares by turnover amount to 50% of all market capitalization so many listed shares have very low turnover. Therefore, the trend of delisting of illiquid shares will continue but turnover might increase as Croatia is expected to adopt Euro and enters EMU in Jan 2023.

Top 10 most traded stocks on the ZSE in 2021 (EURm)

Lastly, we have the Bulgarian Stock Exchange as well as the Belgrade Stock Exchange. While these exchanges are close to each other geographically, they could not be farther apart when it comes to their turnover and the direction they are going in. While the Bulgarian Stock Exchange had a turnover of EUR 261.8m in 2021 (an average daily turnover of EUR 1.06m), which represents an increase of 90% YoY, the Belgrade Stock Exchange had a very similar change but in a completely different direction, with a turnover of only EUR 5.5m in 2021 (as compared to EUR 42m in 2020), which represents a decrease of 87% YoY. This also translates into an average daily turnover of EUR 20k.

On Friday, Allianz announced that it will acquire the Greek insurer European Reliance at EUR 7.8 per share, which translates into P/B ratio of 1.4x. Yesterday, the trading day after announcement, European Reliance closed trading at the same price.

On Friday, Allianz announced it has agreed to acquire the Greek insurer European Reliance to create the 5^th largest insurer in Greece by GWPs. European Reliance General Insurance is a Greek insurance company with EUR 223m in GWPs, a network of 110 retail offices and 5,667 agents. Price for the total share capital amounts to EUR 207m, which is pricing based on a EUR 7.8 per share bid, and represents a 15.7% premium over Friday’s closing price. Allianz also said that it will enter into share purchase agreements covering 72% of European Reliance’s shares, and that it will launch a takeover bid for the remaining stake. In order to acquire the remaining stake, Allianz will have to pay EUR 58m (out of the total of EUR 207m). At the EUR 7.8 per share bid, the P/B ratio of the European Reliance is 1.4x. One day before the announcement, the stock was trading at EUR 6.02, amounting to a P/B of 1.04x.

As a part of the transaction, European Reliance will be combined with Allianz Hellas, the company’s Greek unit. The merged entity will be led by European Reliance’s CEO Christos Georgakopoulos. Following this, Allianz will become 1^st (by market share) in Property-Casualty insurance, 5^th based on total GWPs and 5^th largest Life/Health insurer in Greece.

Following the approval by the Bank of Greece, the Hellenic Competition Commission and the Hellenic Capital Market Commission, Allianz intends to publish the approved Information Circular and proceed with the Voluntary Tender Offer for the shares in European Reliance at the same price. The shareholders can then tender their shares within the VTO acceptance period.

This marks further expansion of one of the largest insurance companies, which operates in the region. To see how they compare to regional insurance companies, we decided to compare them to Sava Re and Triglav, based on P/E and P/B multiples.

P/E and P/B comparison

As can be seen from the chart, Allianz has both the highest P/E and P/B ratios out of these companies at 10.42x and 1.11x. Compared to them, both Sava Re and Triglav are trading at P/E ratios of 6.7x and 9.1x, respectively. Considering the solid performance both companies had during 2021, (and according to the latest report and expectations, they not only achieved the planned earnings for 2021 but exceeded them as well), this shows that both of these companies have room to grow in terms of the share price. At the same time, Sava Re and Triglav are traded at P/B ratios of 0.9x and 1x, respectively. Considering that a P/B ratio of under 1 is considered a solid investment, the takeover P/B multiple shows how attractive is this insurance market and that Allianz is expecting strong synergies of growing market share.