About Crobex

Crobex is a limited capitalization weighted index composed of 20 most traded stocks on Zagreb Stock Exchange (ZSE). Although its constituents periodically change, its overall structure is fairly stable. My coverage will generally include all the stocks which are present in the index, as well as stocks that are liquid enough to be on the verge of entrance or interesting for any other reason.

The index itself is currently (2014-10-01) composed of the following stocks:

Symbol Company name Market Cap Weight
ARNT-R-A Arenaturist d. d. 233.091.000,0000 2,00
ATPL-R-A Atlantska plovidba d.d. 430.043.443,2000 3,70
JDPL-R-A Jadroplov d.d. 58.920.240,0000 0,51
KOEI-R-A Končar – elektroindustrija d.d. 1.139.599.265,0000 9,80
KRAS-R-A Kraš d.d. 321.427.440,0000 2,76
PODR-R-A Podravka d.d. 1.193.342.880,0000 10,26
VART-R-1 Varteks d.d. 32.221.692,7200 0,28
ZABA-R-A Zagrebačka banka d.d. 479.081.957,2000 4,12
DLKV-R-A Dalekovod d.d. 46.388.051,0600 0,40
ERNT-R-A Ericsson Nikola Tesla d.d. 1.034.892.504,0000 8,90
THNK-R-A Tehnika d.d. 55.417.050,0000 0,48
ATGR-R-A Atlantic Grupa d.d.,0000 8,86
PTKM-R-A Petrokemija d.d. 80.095.608,1200 0,69
ADPL-R-A AD Plastik d.d. 355.001.386,5000 3,05
VDKT-R-A Viadukt d.d. 105.980.500,0000 0,91
LKRI-R-A Luka Rijeka d.d. 117.351.890,3100 1,01
LEDO-R-A Ledo d.d. 1.144.737.400,0000 9,84
ADRS-P-A Adris grupa d.d. 1.097.369.430,8000 9,44
RIZO-R-A RIZ-odašiljači d.d. 10.210.623,8400 0,09
ULPL-R-A Uljanik Plovidba d.d. 83.520.000,0000 0,72
VPIK-R-A Vupik d.d. 54.371.644,8100 0,47
INA-R-A INA d.d.,0000 9,96
BLJE-R-A Belje d.d. Darda 122.349.121,0000 1,05
DDJH-R-A Đuro Đaković Holding d.d. 68.690.582,9600 0,59
HT-R-A HT d.d. 1.177.644.038,9900 10,13

It can be further divided into the following sectors:

Telecommunications (HT, ERNT), Industry (KOEI, PTKM, ADPL, RIZO, DDJH), Shipping (ATPL, JDPL, ULPL, LKRI), Food (KRAS, PODR, ATGR, LEDO, VPIK, BLJE), Banking (ZABA), Clothing (VART), Construction (DLKV, THNK, VDKT), Oil&Gas (INA), and of course, Tourism (ARNT, ADRS).

Also of note is RIVP, which is currently not a part of crobex simply because of its merger with KORF, but is certain to enter upon its next revision.

What are the main characteristics of Crobex? The simplest way to describe the stocks is to say they’re generally unprofitable but very cheap. While it may sound discouraging at first, I believe it’s actually quite an investment opportunity. The reason for that is that both of those factors can be traced to the structural problems of the Croatian state. Lack of reforms and a high risk of state default constrain banks and other investors, as well as limiting the profits of most companies mentioned. But on the other hand, it also keeps prices artificially low, which makes some of them a good buying opportunity.

Reforms are bound to happen sooner or later – whether willingly or by force through IMF and the now famous EU Troika. Either way, the loser is going to be the state, while the winners are going to be the investors who put the money in stocks when they were still low. Even if the reforms are delayed to the point where the state enters bankruptcy, recent situation in Greece has shown us that such an event does not have any serious effect on the financials of private companies operating in that environment. Although the situation in Croatia is not nearly that dire, the stock market does not behave much differently than it did in Greece during the Euro crisis. What that basically means is that individual stock prices are often very low, while the chance for individual company bankruptcy is marginal.

However, some companies, even the very liquid ones, are actually doing very badly and run a high risk of failure. Most of them are state-owned, and it’s important to take into account that buying some of them may result in serious losses.

Here I will try to explain which companies are looking good, as well as which companies are a high-risk investment that should be avoided. I will base my analyses on fundamental as well as technical analysis methods. My experience has shown that such a combination is the winning match, as it can identify both cheap opportunities as well as likely turning points.

To see the current index situation, I suggest looking it up here http://www.rast.hr/en/Trziste/vrijednosnica/CROBEX_INDX.html

At the time of this writing, the index looks like this:



You can see marked some important technical indicators that I will now explain in detail. First of all, the index is clearly in a period of sideways movement. The important barriers are positioned at approximately 1250 and 2250 points. Any break through one of these lines will indicate a significant change of sentiment and a strong movement in that direction.

I have also marked an Elliott wave sequence starting with the 2007 peak. As we can see, the first drop was a typical 5-wave format, with a very strong and complex 5th wave. Although some expected a rebound in 2009, it seems that it was only an intermezzo, or in other words a B wave of a long term A-B-C correction. What happened after that is a fairly flat C wave, which still hasn’t reached the 2009 low.

Does that mean that the bottom is yet to come? The answer is – maybe. The reason for that uncertainty is the nature of index itself. It’s not just a single stock, but a composite measure of several stocks. The worst performers are already bankrupt and out, while the best performers get in and hold the numbers higher than they would be for a static composition.

That being said, the C wave is clearly made up of 5 subwaves, but it is yet uncertain whether the last wave is actually over, or whether it will turn out to be a composite structure as well. But if it is indeed over, we won’t have to wait 2250 to see a breakthrough, since breaking the resistance at 2000 will show the wave structure is at its end.

Overall, I would suggest preparing for the possibility of entry, as the 2000 mark is quite close at this moment. However, one must be aware that until that resistance is broken, the possibility of prolonged stagnation and price decline still remains a realistic possibility.

The index, however, is composed of different constituents. So even if the overall sentiment is negative, some opportunities can still be found. However, that’s generally swimming against the current, which means one must be very careful when making such a decision. On the other hand, the market depth is very low, which means that a serious investor will have hard time buying a significant share of any stock without pushing the price up. Buying during a period of decline means that one can gather a much larger amount of stocks at a fairly decent price.



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