As turbulent 2022 is coming to an end it comes only natural what we should write about. Today, we decided to present you with a complete picture of a development we are all interested in – a regional equity performance in 2022.
Central Banks combating inflation – the key theme
The main theme in 2022 regarding the global macroeconomic situation is undoubtedly rising key reference rates from both FED & ECB to combat inflation. With higher rates, central banks try to fight our enemy No.1, consequently slowing an economy. The latest CPI numbers for Croatia reported a 13.5% YoY inflation in November – you can read more about it in the article below in today’s edition. Thus, raising key reference rates should not surprise. We’ve had the longest-lasting bull run up to date, but inflation started to boil as a result of inflationary pressures and long-lasting easing monetary policy as money lifted the value of assets. Inflation is the „enemy“ that should be fought at every cost – even a recession. The primary goal of most central banks is this exactly – to keep inflation low and steady. This is an answer to why we expect further contractionary monetary policy and the continuation of rising reference rates. Because inflation happened and it just has to be controlled, simple as that. Now, we will go into a more detailed overview of regional capital markets.
Croatia
Starting off with Croatia we will look at the CROBEX10 index, which represents the 10 largest Croatia blue chips. Also, with a goal of not going too wide, we will only emphasize a few events outside CROBEX10 that are worth mentioning that occurred during this year.
CROBEX10 as a whole declined by 12.5% during this year. Around half of the constituents outperformed the index, while the other half performed worse compared to the index as a whole. Given the current macroeconomic and geopolitical situation in the world, especially in Europe, this should not surprise. Nevertheless, we note this decline is slightly lower compared to global indices due to lower liquidity and large stake of pension funds in the companies that comprise the index.
Performance of Croatian blue chips in 2022 so far (%)
Moving on to the performance of index constituents itself, first we note none of them actually ended this year in green. Nevertheless, Atlantska Plovidba noted the best relative performance, declining „only“ 2.8%. Regarding Atlantska Plovidba, we emphasize that during the first half of the year the company reported the highest share price increase on the whole exchange. This favourable price movement was driven on the back of strong fundamentals, but those returns were wiped out in the second half of the year due to the whole market declining. Atlantska Plodidba is closely followed by Končar and HT, which also noted just a slight decline of 5% and 6%, respectively. This should also not come as a surprise due to the robustness of both’s companies’ operations.
At the bottom of the list, unfortunately, AD Plastik takes place. As we are all aware, AD Plastik was hit on all lines: both from the stoppage of car production in the Russian territory and from semiconductor shortage in the EU market. As the sanctions imposed on Russia mounted, so did the investors’ sentiment for investment into AD Plastik deteriorate. Next up, Atlantic Group and Arena Hospitality Group, which decreased by 24.4% and 24.3%, respectively. However, it should be noted that regarding Arena Hospitality, this decline is not due to the Company’s fundamentals, as the Company posted one of the best Q3 2022 results.
Further, there are also happened few things to note regarding Croatian capital markets. We witnessed Atlantic Grupa’s 4-to-1 share split. Also, another delisting on ZSE occurred during this year – TPNG. Tankerska Plovidba, which was also the biggest shareholder of TPNG, made a squeeze out of the remaining shareholders after it acquired more than 90% of TPNG. As a result, TPNG will not be on the stock market in the year to follow. Also, regarding the Croatian capital market – there is a high looming grey cloud above it – extra profit tax. You can read more about it here.
Slovenia
Performance of Slovenian blue chips in 2022 so far (%)
Slovenian index SBITOP noted an overall decline amounting to 17.4% during 2022. The largest decline was recorded by Petrol, which lost 24.4% of its market capitalization during 2022 so far. Petrol’s operations were under pressure from higher energy prices, while at the same time, the Slovenian government capped the prices for which Petrol can sell its products, leading to massive losses. Petrol is closely followed by NLB and Krka, which declined by 19.9% and 19.1%, respectively. Also, both insurance companies in Slovenia, Triglav and Sava Re, noted a decrease in share price. Sava Re decreased by 17.2%, while Triglav decreased by 11.5%. Both insurance companies were hit on their equity due to fair value losses on AFS financial assets, which led to an equity decrease for both insurance companies.
Further, a few notable things occurred in the Slovenian capital market. Firstly, there was two share splits in 2022. Cinkarna Celje carried out a 10-to-1 share split, while Petrol’s share split occurred on a 20-to-1 basis. Further, NLB consolidated Sberbank’s subsidiary in Slovenia, while HPB consolidated Croatian’s subsidiary. You can read more about it here.
The biggest contribution to the CPI increase on the annual level was by Food and non-alcoholic beverages, at 19.2%, followed by Restaurants and hotels, at 17%, Furnishings, household equipment, and routine household maintenance, at 16.6%, and Housing, water, electricity, gas and other fuels, at 16.5%.
On Friday, the Croatian Bureau of Statistics (DZS) published the latest report on the developments recorded by the Croatian Consumer price indices (CPI), for November 2022. At the annual level, the CPI in Croatia increased by 13.5%, on a monthly level, it increased by 0.9%, and finally, as an annual average, it grew by 10.1%. This would mean that inflation is still not slowing down, putting continued pressure on households and companies alike.
CPI (January 2013 – November 2022, %)
Source: DZS, InterCapital Research
Breaking this growth on the annual level, the biggest contribution came from the following categories: Food and non-alcoholic beverages, which increased by 19.2%, Restaurants and hotels, which increased by 17%, Furnishings, household equipment and routine household maintenance, with the growth of 16.6%, Housing, water, electricity, gas and other fuels, with 16.5%, Transport, with 13.3%, Miscellaneous goods and services, with 11.6%, Recreation and culture, with 9.1%, Clothing and footwear, with 5.8%, Alcoholic beverages and tobacco, with 4.6%, and finally, Health, at 4.1%.
This data would mean that inflation has truly taken hold of most of the economy; what started with higher food & beverages, and later on higher energy costs, has now spilled over to the majority of the segments of the economy, which would imply that the pressure from inflation is still quite strong. Furthermore, as the CPI is a composite of different categories with different weights in the index itself, these categories have varying impacts on the changes it records. In November 2022, Food and non-alcoholic beverages contributed 4.98 p.p. to the overall CPI, followed by Housing, water, electricity, gas and other fuels at 2.78 p.p., Transport, at 1.96 p.p., Furnishings, household equipment and routine household maintenance, at 0.95 p.p., Restaurants and hotels, at 0.85 p.p. This would mean that the food&beverages contributed 37% of the overall inflation growth, and if combined with the next 2 categories, this would amount to 72%.
CPI change by categories (October 2022, YoY, %)
Source: DZS, InterCapital Research
Looking at the monthly level, the highest increase was recorded by transport, at 1.8%, Miscellaneous goods and services, at 1.5%, Furnishings, household equipment and routine household maintenance, at 1.3%, Food and non-alcoholic beverages, at 1.1%, Recreation and culture, of 1%, Housing, water, electricity, gas and other fuels, of 0.7%, and finally, Clothing and footwear, of 0.5%. On the other hand, prices in Restaurants and hotels decreased by 0.5%.
Here you can find the dates for the upcoming events of the regional companies.
| wdt_ID | Date | Ticker | Announcement | Country |
|---|---|---|---|---|
| 6 | 23.12.2022 | SALR | Salus estimated business plan for 2023 | Slovenia |
Due to the nature of these events, they are subject to change (might be postponed or canceled).