During 2024 thus far, 9 out of 20 companies recorded higher returns than the BET index. At the same time, in terms of trading days, 4 out of 20 companies either matched or outperformed the index more than 50% of the time, 2 came extremely close to matching it, while many underperformed as compared to the index.

Overall, the Romanian equity market thus far in 2024 has recorded solid returns, with 2 companies, i.e. recording >50% returns, while 13 out of 20 BET members recorded double-digit returns, 3 recorded single-digit returns, and 5 recorded losses, of which 2 recorded double-digit losses.

YTD performance of BET constituents (2024 YTD, %)

Source: Bloomberg, InterCapital Research

Looking at the performance more closely, Transelectrica recorded a 58% return in 2024 YTD, followed by Sphera Franchise Group at 52%, Digi at 48%, MedLife at 43%, and Electrica at 40%. On the other hand, Fondul Proprietatea recorded a 24% loss, One United Properties recorded an 11% loss, and Transport Trade Services recorded a 7% loss. While there are many reasons for the performance, varying between companies and sectors that they operate in, there are some general factors that for sure influence these returns. Firstly, the inflation rate, while elevated has come down much lower as compared to its levels in 2022 and 2023.

Furthermore, this led to the recent decisions by the ECB and the Romanian National Bank to reduce key interest rates by 25 bps, to 3.75% and 6.75%, respectively. These reductions generally have a positive impact on equity, which led to the overall good performance of the BET index thus far in 2024, with a YTD increase of 21%.

YTD performance of BET constituents as compared to the BET index (2024 YTD, p.p.)

Source: Bloomberg, InterCapital Research

Comparing the performance of individual companies as compared to BET, Transelectrica outperformed the index by over 37 p.p., followed by Sphera Franchise Group at 31 p.p., Digi at 27 p.p., MedLife at 22 p.p., and Electrica at over 19 p.p. On the flipside, Fondul Proprietatea underperformed the index by over 44 p.p., One United Properties by 32 p.p., Transport Trade Services by almost 28 p.p., and Nuclearelectrica by 25.4 p.p. What this can tell us is that while it is possible to make returns higher than the index, focusing on individual stocks is often far riskier as any shocks on the market will be absorbed far worse by an individual company than a whole index, but vice versa is also possible.

Besides raw returns, it is also prudent to look at the performance of individual companies as compared to the index, in terms of trading days on which the former or the latter performs better. While by itself it cannot tell us much, in combination with the overall returns it can give us insight into the market dynamics in the Romanian market.

How often did BET constituents outperform the index (number of days in 2024 YTD, %)

Source: Bloomberg, InterCapital Research

As we can see, there are only several individual companies that recorded positive returns on more days than the index. Due to these members’ weightings in the index, any increase they experience gets translated to the index based on their weight, while any decrease is also reflected there, to a lesser extent. In 2024 YTD, only 4 companies outperformed or matched the index in this metric, with Banca Transilvania outperforming the index on 53% of the days, BRD at 52%, Transgaz at 51%, and Electrica at 50%. On the other hand, BVB outperformed the index on “only” 38% of the days, as did Teraplast, One United Properties, and Nuclearelectrica.

Overall, this data can show us that while individual investments and returns on them are possible, investing in an index, especially one that tracks the performance of the blue chips of a given country does have its benefits. Risk reduction is the primary one, and lower transaction costs are the other. Furthermore, given the fact that ETFs are available on many indices, lower management costs are also present. Lastly, many of the ETFs, such as the ones tracking CROBEX10 TR index (tickers: 7CRO on ZSE, ICCRO on LJSE), SBITOP TR index (tickers: 7SLO on ZSE, ICSLO on LJSE), and BET TR index (tickers: 7BET on ZSE, ICBET on LJSE, ICBETNETF on BVB) are also total return index, meaning that dividends, which can range between 3-4% for Croatia, up to 5-8% in Slovenia and Romania, are reinvested, meaning no dividend tax has to be paid on them.

At the end of June 2024, the total tourist arrivals in Croatia amounted to 3m, representing an increase of 3% YoY, but a decrease of 4% compared to June 2019. Furthermore, total tourist nights amounted to 14.3m, declining by 5% both YoY and compared to June 2019.

Recently, we’ve done a blog detailing the current situation regarding tourism in Europe and Croatia, and the long term trends and our expectations. You can read more about this here. Today, we’re bringing you the overview of June 2024, the month when the official tourism summer season starts.

According to the latest report by the Croatian Tourism Board, HTZ, the total number of arrivals in June 2024 amounted to 3m, representing an increase of 3% YoY. Of this, foreign tourists accounted for 2.67m, representing an increase of 4% YoY, while domestic tourists amounted to 330k, increasing by 1% YoY. On the other hand, total tourist nights amounted to 14.3m, decreasing by 5% YoY. In this, foreign tourists accounted for 12.9m nights, declining by 5% YoY, while domestic nights amounted to 1.38m, decreasing by 3% YoY. This would also mean that the average stay per person amounted to 4.75 nights, declining by 8% YoY.

Total tourist arrivals and nights in Croatia (January 2019 – June 2024)

Source: HTZ, InterCapital Research

Compared to 2019, total tourist arrivals declined by 4%, influenced by 6% lower foreign tourist arrivals, while the total domestic arrivals grew by 10%. A similar story is present with tourist nights, which declined by 5% compared to 2019, due to 5% lower foreign tourist nights, and 7% lower domestic nights.

In terms of accommodation types that were most frequently selected and used, 88% of nights were recorded in commercial accommodation, 8% in non-commercial, and 4% went to nautical accommodation. Inside the commercial accommodation, 39% of tourist nights were recorded in private accommodation, 27% in hotels, 25% in camps, and 9% went to other types of accommodation.

Most nights were recorded by tourists from Germany, i.e. 26%, followed by domestic arrivals at 10%, Slovenia and Austria at 9% each, respectively, Poland at 7%, and Czechia at 6%. In terms of the most visited counties, Istra is at the top of the list, with 4.19m tourist nights, followed by Splitsko-dalmatinska at 2.82m, Kvarner at 2.32m, Zadarska at 1.9m, Dubrovačko-neretvanska at 1.29m.

Overall, the data present here is unfortunately not that positive. While arrivals and nights are stable, one would expect at least some growth every year as Croatia becomes a more and more popular destination. However, a combination of high prices in Croatia, which far outweighed inflation growth in this sector surely negatively influenced this. On the other hand, when we consider many other Mediterranean options which are significantly, in double-digit levels less expensive than Croatia, then the slowdown in growth isn’t that surprising. Furthermore, while new events and content are being added in Croatia, it seems to be quite lacking as it is failing to attract new and more people to the country. All of these factors combined, among many others for sure had an influence on this result. Given the importance of tourism to the Croatian economy then, it isn’t easy to determine how long will revenues and profits be able to grow, if the numbers of arrivals and nights are stagnant, and as such these figures are only driven by higher prices.

Here you can find the dates for the upcoming events of the regional companies.

Due to the nature of these events, they are subject to change (might be postponed or canceled).