Friday, 18 March 2022

Croatian Equity Market: Impact of the Russian Invasion of Ukraine

March 18thund 2020 - An overview of the Croatian equity market and how it reacted to the Russian invasion of Ukraine.

On the 24th of February 2022, a full-scale Russian invasion of Ukraine began. The world was struck and this was also evident when looking at the capital markets which reacted very suddenly and there was a lot of volatility in the markets.

The Croatian equity market can be observed by looking at the benchmark index CROBEX10 which is made up of 10 Croatian blue-chip companies with the largest free-float, liquidity, and market capitalization. CROBEX10 fell by 6,47% on the first day of the invasion falling from 1284.56 to 1201.42. The downward trend has started even before that which is not odd since financial markets are to a large extent forward-looking.  CROBEX10 reached its peak on 19th January at 1342.93 and has from there slipped down to 1152.36 on March 8th, cumulatively falling by 14,19%, and technically speaking entering into a correction phase. From March 8th to March 17th at the time of writing this article CROBEX10 has soared back up by 6,57% and it reached 1228.




When comparing Croatian CROBEX10 with other European and American market indices we can see that some Indices experienced an even more drastic market sell-off. Most notably Polish WIG fell by 11%, Hungarian BUX fell by 10%, and Slovenian SBITOP and Austrian ATX dropped 7% on the first day of the invasion. 



Some of these indices have managed to return near the price levels as before the war while others are still deep in the red zone. As of 17th of March, Austrian ATX is at -9%, Cezch PX and Hungarian BUX at -6% while Croatian CROBEX10 is at -4% compared to their price levels on the 23rd of February.

When looking at CROBEX10 and its 10 constituents we can see that on the first day of the invasion the biggest drop can be seen in Ad Plastik -18%, Atlantska Plovidba -12%, and Podravka -9%.


It is interesting to see how the market reacts to an unpredictable event such as this war and it is the best indicator of the extent of exposure these companies have to Russian and Ukrainian markets. As of the 17th of March, most of these companies are near the price levels before the war. Two companies that made an official statement to ZSE and which are clearly exposed to these markets are AD Plastik and Podravka which is also seen in their price level which is currently -33% and -7% respectively, compared to the price levels before the escalation.




AD Plastik is a Solin-based manufacturer of automobile components. Unfortunately, AD PLASTIK is largely impacted by the Russian Ukrainian war. They have two factories in Russia which together account for around 25% of their revenue according to their statement published by ZSE. These two factories sell exclusively to the Russian market and through them, AD Plastik is exposed to the fluctuation of the Russian Rubble. The AD Plastik share price was falling from the start of the war on the 24th of February until March 7th falling by 44% and whipping out nearly 300 million HRK from their market capitalization. As of 17th March, its share price has scaled up to 105 HRK which is a 20% increase but it is still 33% lower than the share price before the start of the war.

The additional burden was the release of their 2021 financial statements on the 24th of February, which showed a drop in operating revenue by 6.8% and a drop in their EBITDA margin by 273 bps. This is most likely caused by the chip shortage and other supply chain problems in the automobile industry.

On a positive note, on March 9th, they made a public statement announcing a new contract with Stellantis Group and Motherson Group for the European market which are together worth 73,6 million Euros.



Podravka is Koprivnica based food and pharmaceutical company. According to their statement published on ZSE, the group’s exposure to Russian and Ukrainian markets account for less than 6.5% of their sales revenue. Belupo, their pharma division, had 37,1% of international sales in Russia according to their 2020 annual report. Considering that their pharma division had significantly higher EBITDA margins In 2021 with 20.5% compared to 10.6% in the food division, it Is likely that investors expect a decrease in EBITDA margins in the coming period.

On the positive side, their 2021 financial report recorded a 2.8% increase in the group’s sales revenue and a 64 bps increase In their EBITDA margin.

To conclude, the Croatian equity market has been through a few turbulent weeks and has managed to partially recover but we are still surrounded by a high level of uncertainty, with the war in Ukraine still raging, with rising inflation, and the upcoming interest rate hikes it will be a challenge for the whole world and especially for the European continent.

Disclosure: I do not own any of these shares and this article is purely for informational purposes and should not be used as the basis for any investment decisions.


EBITDA – earnings before interest taxes depreciation and amortization

WIG - Warsaw Stock Exchange General Index (WIG) 

BUX -Budapest Stock Exchange  Index

SBITOP – Ljubljana Stock Exchange  Index

ATX - Austrian Traded Index

PX- Prague Stock Exchange  Index

S&P500 - Standard and Poor's 500  Index

EURO STOXX 50 - stock index of Eurozone stocks 

CROBEX- Zagreb Stock Exchange  Index

Sources: , , RGFI , ,,

For more, check out our business section.

Thursday, 17 March 2022

Medical Chamber Launches Humanitarian Campaign for Ukraine

ZAGREB, 17 March 2022 - The Croatian Medical Chamber (HLK) said on Thursday that it had launched a humanitarian campaign to raise funds to help the Ukrainian people and doctors.

The HLK is to donate HRK 300,000 as part of the campaign and it calls on its members to help raise funds, which will be used to buy medical products and equipment for Ukrainian doctors and people.

The HLK said that it strongly condemned the Russian aggression on Ukraine and the increasingly frequent attacks on civilian buildings, health institutions and medical workers.

The HLK drive will last until 1 April, and the money raised will be paid into a special fund for medical aid to Ukraine, established by the European Forum of Medical Associations (EFMA), Standing Committee of European Doctors (CPME) and World Medical Association (WMA).

The HLK said donations can be made via its bank account IBAN: HR7923400091511179558, poziv na broj 2022; opis uplate "Hrvatski liječnici za Ukrajinu".

For more, check out our lifestyle section.

Thursday, 17 March 2022

We Certainly Didn't Send Drone Towards Croatia, Ukraine Defense Minister Says

ZAGREB, 17 March 2022 - "Ukraine is investigating the incident with the unmanned aerial vehicle that crashed in Zagreb last week and it certainly did not launch it towards Croatia", Defence Minister Oleksii Reznikov said on Thursday.

"I am in daily contact with my Croatian colleague, we are talking about that. We are investigating the incident and I assure you we are not the ones who launched that drone towards Croatia. Croatia is our friend and we would never do that", Reznkov said.

He was taking part via video link in a meeting of the European Parliament's Foreign Affairs Committee, the Security and Defence Subcommittee, and the EU-Ukraine parliamentary delegation.

Responding to a question from Croatian MEP Tonino Picula, Reznikov recalled that Ukraine had been among the first countries to recognise Croatia and to send it weapons during the 1991-95 war.

He said the drone incident raised the question of NATO's security system.

"The drone flew over several member states. How come you didn't see it? Why didn't you destroy it? Can you cover your own airspace?", Reznikov said, describing his question as rhetorical.

For more on this, check out our dedicated politics section.

Thursday, 17 March 2022

Croatian Financial System Shielded From Likely Russian Bankruptcy

March the 17th, 2022 - The Croatian financial system is well protected from the increasingly likely scenario of total Russian bankruptcy following harsh global sanctions placed on them after their unjustified shock invasion of neighbouring Ukraine.

As Poslovni Dnevnik/Tomislav Pili writes, Russian bankruptcy, which is increasingly likely to occur soon, will not be felt by the Croatian financial system, and global finances should not be shaken by such a scenario either, according to Croatian analysts.

After announcing on Monday that the Russian Ministry of Finance will pay out interest to foreign investors in rubles instead of dollars, the story coming out of Moscow altered Russia's state treasury has announced an order has been sent to pay 117.2 million US dollars in coupon interest on Eurobonds it has to pay out to foreign investors this week, dispelling any speculation that it won't be able to meet these financial obligations.

This is what's known as coupon interest on Eurobonds maturing in 2023 and 2024, and Moscow is thus preparing to settle its first foreign debt obligation since the imposition of harsh sanctions following the Russian invasion of Ukraine.

Reuters noted that it couldn't immediately confirm the information on the preparation of these coupon interest payments with the bondholders. The payment of coupon interest in rubles would mean that Russia wouldn't be able to settle its obligations under the bond, so it would have to repay the entire debt. Russia has to settle obligations on 15 bonds issued on international markets worth about 40 billion US dollars, according to Reuters. Approximately half of these bonds are owned by foreign investors.

''The last time Russia failed to meet its financial obligations to foreign investors was more than 100 years ago, after the revolution of 1917, when the Bolshevik Government did not recognise the debt of the then-tsarist Russia. If Russia avoids bankruptcy in its current situation, international markets believe it will only be a postponement of the inevitable.

The recent statement by the head of the International Monetary Fund that Russia's possible bankruptcy is no longer considered an unlikely event actually confirms what has been "read" from financial markets for some time, looking at Russian bond prices, said Mate Jelic,'' an analyst at Erste Bank.

"Russian dollar bonds have been trading at only 15-20 percent of the nominal value for some time now, which actually implies their expected bankruptcy. According to Bloomberg, the total exposure of foreign investors, including debt in rubles and foreign currencies, doesn't exceed 70 billion US dollars, which roughly corresponds to the exposure of Argentina's total debt when the country went bankrupt back in 2020. Even if this worst-case scenario does occur, ie if Russia stops paying the entire amount of its debt held by foreign investors, no major shocks are expected on the global financial market," Jelic assured.

When asked how much the Croatian financial system could be threatened by a possible Russian bankruptcy, the Croatian Financial Services Supervisory Agency (Hanfa) said that, according to their analysis, the Croatian non-banking financial sector is more or less not directly exposed to the securities and financial instruments of Russia, Ukraine and Belarus.

"In Croatia, there are no financial companies from Hanfa's supervision that are directly owned by Russia. Due to the already existing legal restrictions, pension funds are not directly exposed to Russian, Belarusian and Ukrainian financial instruments, nor are they exposed to open-end investment funds and leasing companies,'' they explained from Hanfa. The assets of insurance companies are only 0.5 percent exposed to direct investments in financial instruments of Russian issuers.

"Despite the impact of the war in Ukraine on the Zagreb Stock Exchange, it's important to note that there are no listed financial instruments related to Russian issuers or indices of Russian stock exchanges, so there were no suspensions of trading financial instruments as on other European stock exchanges. In addition, the stock exchange isn't exposed to Russia in terms of ownership, ie to the persons listed on the list of Russian sanctions,'' they concluded from Hanfa.

For more, check out our politics section.

Tuesday, 15 March 2022

Stjepan Curaj: 6 Suspicious Yachts Tied to Russians in Croatian Ports

March the 15th, 2022 - State Secretary Stjepan Curaj has stated that there are currently six ''suspicious yachts which are tied to Russians'' moored in various Croatian ports.

As Morski writes, State Secretary of the Ministry of Finance, Stjepan Curaj, spoke recently about sanctions put in place against Russians close to Vladimir Putin's regime on RTL. He said that out of a total of 950 oligarchs on the list under current European Union (EU) sanctions, 680 of them were detected on February the 23rd, 2022, as those with direct or indirect ties to the Republic of Croatia.

Stjepan Curaj claimed that it is difficult to talk about the estimated value of their assets and property, and when it comes to movables, he says that six potentially suspicious yachts have been detected moored in Croatian waters and that the procedure surrounding all of that information is ongoing.

He also spoke about the case of a yacht in Betina on the island of Murter, and Stjepan Curaj said that he doesn't know specifically whether it is owned by someone on the infamous list, but in addition to Murter, he says, there are other ports in which this is an issue. He explained the procedure and stated that when it is determined that it is owned or under the control of a person placed on the Russian sanction list, then it is frozen and the Harbor Master's Office prohibits its release and departure. He assumes that this will be the case in Betina as well.

He also mentioned the yacht in Rijeka, which is well-known in the media and which we recently wrote about, and confirmed that it has indeed been frozen.

When asked about sound names involved, he said that Abramovich is the most famous of them all, and when asked if tycoon Vekselberg, who operates down in Dubrovnik and whose property and assets are currently blocked by the USA, is on the list, he claimd that he is on the American list.

As for the consequences for the businesses owned and carried out by these people, and thus for their employees, the Secretary of State says that there is a procedure and clear guidelines. “We need to clearly separate the company from the owner, in that the owner can’t use their company economically and have any financial benefits from it, but we also need to allow it to work because that’s our goal,” he explained.

Finally, he answered the question surrounding confiscated property and the idea coming from Britain to put that property into the function of receiving and caring for Ukrainian refugees. Stjepan Curaj said that sanctions against Russia are prescribed by the 2014 provision and it determines that all property be frozen and be made unable to be used for anything else. If we were to decide to adopt Britain's idea and use it in another way, he says the provision should be changed.

For more, check out our politics section.

Monday, 14 March 2022

Croatian FM Visits Estonia, Says Russian Invasion Could Destabilise Bosnia & Herzegovina

14 March 2022 - Croatia's foreign minister told his Estonian counterpart Eva-Maria Liimets on Monday that Croatia was being solidary with Ukraine by sending it financial aid and defence equipment and taking in refugees, warning of possible destabilisation in Bosnia and Herzegovina due to the war in Ukraine.

The talks between Minister Gordan Grlić Radman of Croatia and his Estonian counterpart Eva-Maria Liimets focused on the Russian aggression on Ukraine. "The importance of the unity and solidarity of the EU and transatlantic partners was underlined, as was the importance of continuing the implementation of restrictions against Russia," the Croatian ministry said in a statement.

Grlić Radman said Croatia "is showing its solidarity with Ukraine by sending it financial assistance and defence equipment and by taking in Ukrainian refugees. The minister warned of the possibility of further destabilisation of the Western Balkans, notably Bosnia and Herzegovina, due to the war in Ukraine," the Croatian ministry said.

"We strongly advocate the election reform in Bosnia and Herzegovina, confident that it would improve relations between the constituent peoples and secure legitimate and just elections," Grlić Radman said.

As regards the security situation in Europe, Grlić Radman reported about the crash of an unmanned aerial vehicle in Zagreb last week and the continuation of the investigation into the incident.

The minister stressed that the case was an indicator of the need for a better and closer communication and cooperation between NATO members, the ministry said in the statement.

It underlined the very good, friendly relations between Croatia and Estonia, their regular cooperation at the highest levels and their partnership within the EU, NATO, Three Seas Initiative and other international formats as well as the potential for enhancing bilateral cooperation.

During his visit to Estonia, Grlić Radman and his host opened a Croatian-Estonian business forum focusing on IT and digitalisation, which was attended by executives of IT companies from the two countries.

Grlić Radman also met with Estonian Defence Minister Kalle Laanet and Parliament Speaker Jüri Ratas and visited the NATO Cooperative Cyber Defence Centre of Excellence.

Sunday, 13 March 2022

Croatia Asking for US Patriot Air Defence System, Jutarnji List Says

ZAGREB, 13 March 2022 - A Croatian Defence Ministry delegation is travelling to Washington next week to ask for the temporary deployment of the Patriot air defence system in Croatia, Jutarnji List newspaper said on Sunday, citing an unofficial source.

Jutarnji List asked Defence Minister Mario Banožić on Thursday whether Croatia was discussing air defence assistance with its allies, and he said that the matter would be discussed in Washington next week. The source quoted by the newspaper on Sunday said that the Patriot surface-to-air missile system would also be on the agenda.

The US army recently installed this system in Poland as part of NATO's defence. These systems are stationed in Germany, from where the US army deploys them elsewhere in Europe.

The US army used the Patriot system last year for the Astral Knight exercise at Zemunik air base, inland from the central Croatian Adriatic city of Zadar.

As an affordable solution for the Croatian medium-range air defence system, many professionals recommend the purchase of the Norwegian NASAMS system, the newspaper said.

For more on this and Croatia's response to the Russia-Ukraine war, visit TCN's dedicated page.

Sunday, 13 March 2022

Enter Croatia Application Upgraded to Include Ukrainian Language and Alphabet

ZAGREB, 13 March 2022 - The Ministry of the Interior has upgraded the Enter Croatia application to include the Ukrainian language and alphabet, improving the organisation of the reception of Ukrainian refugees and facilitate their arrival in Croatia.

"This is yet another measure with which the Ministry of the Interior, acting in cooperation with other state authorities, is expressing solidarity with the people of Ukraine and assisting in providing refuge to Ukrainians displaced by the Russian invasion", Minister Davor Božinović told Hina on Sunday.

"The application has proved very useful during the tourist season and the arrival of many foreign tourists, given that the collection of personal details during border checks took quite a lot of time," he added.

The aim of the latest upgrade of the Enter Croatia application is to make it easier for Ukrainian refugees who have passports and intend to stay in Croatia to provide in advance their personal details, address and contact number to facilitate their entry into Croatia. Persons without a passport will have to provide this information at the border crossing.

The Ministry of the Interior is in close contact with the Croatian Ambassador to Ukraine, Anica Djamić, and is doing all in its power to help displaced Ukrainians on their arrival in Croatia, Božinović said.

The Enter Croatia application is aimed at reducing the waiting time at border crossing points. It was developed by the Ministry of the Interior as part of measures to contain the spread of the coronavirus and has been in use since 28 May 2020. Over 12.5 million arrivals have been announced via this app since its introduction.

According to information from Sunday morning, 5,609 Ukrainian refugees are currently staying in Croatia and 88 per cent of them are women and children.

For more on Croatia's response to the Russia-Ukraine war, visit TCN's dedicated page.

Sunday, 13 March 2022

Remnants of Aerial Bomb Found in Drone That Crashed in Zagreb

ZAGREB, 13 March 2022 - Remnants of an aerial bomb have been found in the Soviet-era drone that crashed down in southwest Zagreb late on Thursday, Defence Minister Mario Banožić said on Sunday.

"Traces of an explosive device have been found, indicating that this was not a reconnaissance drone. We have found parts of an aerial bomb," Banožić told reporters at the crash site after the bulk of the drone had been dug out of the ground.

He said that it was a Soviet-made unmanned aerial vehicle, but that it was still unclear whether it had come from the Russian or Ukrainian side.

"We will be able to say what its purpose was only after an analysis. This type of bomb was used by aircraft," he added.

Banožić said that the area around the crater was now safe and there were no explosive substances there.

The Seismology Service said on Saturday that its seismographs had registered the impact of the flying object in the Jarun area of southwest Zagreb at 23:01:49 on Thursday.

The drone fell about 50 metres from a student dorm but no one was hurt. About 40 cars parked in a nearby car park were damaged.

For more on this breaking story and politics in Croatia, visit TCN's dedicated page.

Friday, 11 March 2022

German Croatian Holiday Booking Boomed Before Russian Ukraine Invasion

March the 11th, 2022 - German Croatian holiday booking was exceeding 2019's pre-pandemic levels and experiencing a real ''boom'' just before Vladimir Putin's shock invasion of neighbouring Ukraine a couple of weeks ago.

As Poslovni Dnevnik/Marija Crnjak writes, up until the beginning of the unjustified Russian invasion of Ukraine last month, German Croatian holiday booking levels were truly excellent, even better than in pre-pandemic 2019, but what the rest of the tourist season will look like this year is uncertain because the entire European market is currently in a state of shock.

This is how Romeo Draghicchio, director of the Croatian National Tourist Board (CNTB) in Germany, describes the current situation, on the occasion of the ITB Berlin fair, which is being held in a virtual form this week for the third year in a row due to the coronavirus pandemic.

"In Germany, there are concerns about the war in Ukraine, but so far we aren't really seeing a significant impact on consumer habits. However, since the beginning of the war, programmes for Russia and Ukraine have been cancelled, while cruises aimed at St. Petersburg are being diverted to other ports. It will take more time to assess the real consequences for the summer season because there is currently a shock in the market. When we talk about Croatia, until the outbreak of the conflict, booking was at a higher level for the country, even when compared to the 2019 tourist season, which was a great sign,'' he said.

''What the further course of the season will unfold like remains to be seen, but the good position of this country on the German market has been confirmed by the recently published research "Reiseanalyse" of the FUR Institute for 2021, according to which Croatia climbed to the ranks of the top four German destinations. In addition to that, as pointed out by the FUR, in 2021, Croatia was the only destination that increased its market share when compared to 2019,'' added Draghicchio when describing the German Croatian holiday booking trends so far.

It's worth noting that this year's ITB is being held in two parts, one part was held from March the 8th to the 10th, the ITB Convention, which focuses on digital and sustainable solutions with the transfer of all sessions on the official ITB platform. The programme also includes lectures by a number of international top speakers and tourism experts. The second part of the ITB refers to the Digital Business Day, which will be held on March the 17th.

It is a concept conceived as a platform for the networking of exhibitors and buyers, and each participant creates their own personal business profile and communicates with potential partners or clients through audio/video tools. Within this part of the ITB, CNTB representatives will also create their profiles and hold a series of meetings with partners and the interested business community.

CNTB Director Kristjan Stanicic pointed out that if the situation in Ukraine lasts any longer, we can expect greater disruptions in the wider tourism market, especially in countries in the immediate vicinity of Ukraine, such as Poland, Slovakia and Hungary.

For more, check out our travel section.

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