The domestic capital market still lacks greater activity from investors, especially small ones, and thus greater liquidity, but Croatian stocks have achieved impressive price growth in the last two years, envied by many more renowned global exchanges. As highlighted by the CEO Ivana Gažić at the 13th Zagreb Stock Exchange Awards ceremony on Monday, this 2024 can also be assessed as very successful for the domestic capital market.
– Due to the exceptional price growth this and last year, we are one of the fastest-growing markets in Europe, but also in the world – stated the head of the Zagreb Stock Exchange.
Her words are confirmed by the numbers. The value of all shares on the Zagreb Stock Exchange at the end of November amounted to nearly 28 billion euros, which is 22 percent higher compared to the end of last year. Compared to the end of 2022, the growth in the value of domestic shares is even more impressive: over 55 percent. The ‘inflation’ on the stock exchange is also visible through the most important domestic stock indices. CROBEX is up 26 percent for this year, as of last Friday, and with 3193 points, it is at its highest level since 2008. Along with an excellent 2023, the main domestic stock index has jumped 61 percent in two years.
The Need for Integration
The narrower CROBEX10 achieved an even more fascinating growth of 73 percent in the last two years, of which it strengthened by 29 percent just this year. It is also worth noting that the total market capitalization reached 48.4 billion euros, which is 41 percent more than two years ago. As Ivana Gažić added, new listings were absent this year, despite announcements, but there were capital increases of companies through the capital market, and another investment fund whose shares are traded on the stock exchange (ETF) entered the market. Gažić emphasized that the assets of ETFs are growing strongly and have already reached 75 million euros. However, for now, only one issuer is placing them on the market, so Gažić said she hopes that more issuers will appear soon.
ETFs have allowed Croatian investors to invest money in foreign shares, such as Romanian ones, and a new step in that direction will be regional integration that the Zagreb Stock Exchange is working on with several other European exchanges. As Gažić explained to Lider, meetings of representatives of exchanges from Croatia, Slovenia, Hungary, Poland, Romania, Bulgaria, Slovakia, and North Macedonia are being held within the EBRD initiative.
– We would like to facilitate cross-border access to these markets for small investors. All involved exchanges recognize the need for stronger integration, especially in the context of the Capital Markets Union and the existence of large stock exchange groups in Europe – said Ivana Gažić.
The market recovery was highlighted by Ante Žigman, chairman of the Governing Council of the Croatian Financial Services Supervisory Agency (Hanfa), and the affirmation of investment in securities has been significantly aided by government debt securities intended for citizens, such as bonds and treasury bills. – Double-digit index growth and a 30 percent increase in daily stock market turnover are reasons for optimism – said Žigman. In his opinion, small and medium-sized companies should be encouraged to go public, as well as further development of financial instruments related to sustainability, such as the recent bond of the Adriatic Galenic Laboratory.
State Secretary in the Ministry of Finance Davor Zoričić reminded that the Strategic Framework for the Development of the Capital Market will be presented soon. This document was announced last year. According to Zoričić, the Strategic Framework contains ambitious but achievable goals, such as achieving ’emerging market’ status for the Croatian stock exchange. This status would enable a significantly larger influx of foreign investors.
New Transparency Rules
Ante Žigman and Ivana Gažić also signed a new Corporate Governance Code for companies listed on the stock exchange during this event. As the head of Hanfa explained before signing, the new Corporate Governance Code represents a significant step in aligning the Croatian capital market with international standards.
– It is the result of years of work and reflects changes in the regulatory framework of the European Union and the principles of the G20 and OECD from 2023, especially in the area of sustainability, resilience, and socially responsible behavior, making it a modern tool for improving governance practices – emphasized Žigman.
The Code, whose provisions will apply from January 1, 2025, is also aligned with the OECD recommendations for Croatia as part of the process of joining full membership in that organization. Special attention has been paid to improving the management of transactions with related parties, the disclosure of shareholder agreements, the holding of virtual assemblies, as well as strengthening the independence and transparency of supervisory boards. Changes also include improvements in the area of inclusive work environments, equality, preventing discrimination, managing conflicts of interest, and policies of responsible business conduct and risk management.
