In order to sell 1% of the market cap of ZSE, one would need 126 days. However, we note if we were to take into account the free-float market cap, the figure would be relatively lower.

It is known that relatively low liquidity is an ongoing challenge for not just Croatia and Slovenia, but also other regional markets. Some of the reasons behind this could be a relatively low free float of market capitalization, a small investment universe, a lack of a large retail investor base, etc.

For today, we decided to calculate how many days one would need, to sell 1% of the total market capitalization of regional stock exchange markets.  The stock exchanges we observed were ZSE, LJSE, BELEX and BVB.

It does not come as a surprise that the Romanian stock exchange market is the most liquid, keeping in mind that the average daily turnover was EUR 10.3m and the market cap EUR 43.9bn. To sell 1% of the market cap on the Bucharest Stock Exchange, one would need “only” 43 days, which is the lowest of all observed stock exchanges. LJSE closely follows the Romanian stock exchange with 50 days needed. However, we note that the average daily turnover is significantly lower, amounting to EUR 1.7m, but the lower average daily turnover is also tied to a much lower market capitalization on the Slovenian stock exchange.

Meanwhile for ZSE, one would need 126 days to sell the same. This is a direct result of both very high market capitalization on ZSE combined with slightly lower turnover compared to the Slovenian stock exchange market. However, if we were to consider the free-float market cap, the figure would be relatively lower.

Time Needed to Sell 1% Market Cap

By the end of December 2022, the NAV of Croatian mutual funds lost almost a quarter of its value YoY, decreasing by 24.4% YoY, and 3.2% MoM. In total, the NAV of the funds amounted to EUR 2.16bn.

The Croatian Agency for the Supervision of Financial Institutions, HANFA, has recently released its updated monthly report on the developments and changes that were recorded by the Croatian capital markets. Today we are bringing you an overview of one of the major players in these markets, the Croatian mutual funds. According to the latest data in December 2022 (and thus accordingly, the entire 2022), the NAV of Croatian mutual funds decreased by 24.4% YoY, and 3.2% MoM, amounting to EUR 2.16bn. This would mean that in 2022, the NAV of Croatian mutual funds decreased by almost a quarter YoY. If we were to compare the numbers to the pre-COVID-19 maximum, the situation is even worse, with the NAV decreasing by over 30%.

In terms of the asset changes of the funds, on a monthly basis, the largest absolute decrease was recorded by the money market holdings, which decreased by EUR 30.3m, or 46%, bonds, which declined by EUR 26.3m, or 2%, receivables, which decreased by EUR 18.9m, or 91%, and investment funds, which decreased by EUR 7.7m, or 3.9%. In fact, during the month, no asset class recorded growth, which is evident if we look at the aforementioned 3.2% overall MoM decrease in NAV.

At the same time, on a YoY basis, we have pretty much the same story. All asset classes except one decreased, and that one (receivables) only increased by a tiny bit (EUR 533k). On the other hand, the largest decreases by far were recorded by bond holdings, which decreased by EUR 339.9m, or 21%, deposits and cash, which declined by EUR 269.4m, or 42%, shareholdings, with a decline of EUR 65.8m, or 19%, the money market holdings, which decreased by EUR 28.7m, or 45%, and finally, inv. funds, which declined by EUR 27.2m, or 13%.

Total assets of all Croatian mutual funds (2015 – December 2022, EURm)

Source: HANFA, InterCapital Research

Considering the current macroeconomic and geopolitical situation in Europe, pressure on different asset holdings is to be expected. However, just looking at the change in asset holdings doesn’t give us an entire picture, as we should also look at net contributions into the funds. The reason why is that the decline in value can be both due to a decrease in the inherent value of the assets, but also due to the investors redeeming their stakes in the funds (for example, funds that hold the majority of their assets in bonds), thus driving its value down even further. Looking at the net contributions, in December 2022, they were negative at EUR 277.9m, with the contributions into bond funds declining the most, at EUR -297.6m, while the other fund category increased by EUR 43.9m. This would further show that the decline in NAV was both due to the decline in the asset value as well as the increase in redemptions.

Taking a look at the securities and deposits, on an MoM basis, they decreased by EUR 11m or 4.1%. Of this, both domestic and foreign securities and deposits declined by roughly the same, at EUR 5.45m and EUR 5.57m, respectively. On a YoY basis, they declined by a total of EUR 72.6m, or 22.1%. Of this, domestic securities and deposits decreased by EUR 61.2m, or 31.3%, while foreign securities and deposits declined by EUR 11.4m or 8.6%.

Lastly, looking at the current asset structure of the funds, we can see that the largest share is held by bond holdings, at 59.6%, which is an increase of 1.2 p.p. MoM, and 3.4 p.p. YoY. Following them, we have deposits and cash, which accounted for 17.3% of the total, an increase of 0.6 p.p. MoM, but a decrease of 4.9 p.p. YoY. The only other 2 notable categories are shares, which held 12.8% of the total, an increase of 0.3 p.p. MoM, and 1 p.p. YoY, and investment funds, which held 8.6% of the total, remaining roughly the same MoM, but recording an increase of 1.2 p.p. YoY.

Croatian mutual funds AUM structure (December 2022, %)

Source: HANFA, InterCapital Research

In January 2023, BELEX15 experienced an increase of 4.3%, ending the month at 860.34 points.

The Belex (Belgrade Stock Exchange) released its monthly report on trading activity for January 2023. The report states that the total equity turnover amounts to EUR 1m, an increase of 90.7% YoY. However, we note the increase is under the effect of a very low base and that the nominal increase is neglectable for the stock exchange. This would also mean that the average daily turnover amounted to EUR 50.1k.

Looking at the specific companies, NIS was the one that was traded the most on the exchange, with a turnover of EUR 362k and a share price gain of 2.96% MoM. The next company is Žitopek, which showed a strong increase in the share price of 75.1% MoM and had a turnover of EUR 193.5k. They are followed by Dunav osiguranje, Alfa plam, and Jugoprevoz Kruševac, who each had a turnover of EUR 171.3k, EUR 103.7k, and EUR 35.3k, respectively.

Looking at the biggest gainers during the month, we have already mentioned Žitopek with a monthly increase of 75.1%, followed by Transport Voždovac with 30%, and Alfa plam, with an increase of 10.1%. On the other hand, Putevi lost 49.6% of its value, followed by Severni Banat, which lost 24% of its value and Jugoprevoz Kruševac, which lost 22% of its value.

Finally, BELEX 15, the primary index of the Belgrade Stock Exchange, increased by 4.3% during the month, ending at 860.34 points.