Croatian Equity Indices in Free Fall: The ING-GRAD Listing Debacle

The Croatian equity market has been experiencing a significant downturn in recent months, with the ING-GRAD index falling to a record low of 1,154.50 points, marking a decline of over 18% since the start of the year. This downward trend has raised concerns among investors and analysts, who are struggling to understand the underlying causes of this decline. As the Croatian economy continues to navigate the challenges of the pandemic and Brexit, the ING-GRAD index's listing has been met with skepticism, with many questioning the impact of this new listing on the overall market performance.

One of the primary concerns surrounding the ING-GRAD listing is the influx of foreign investors, particularly from the Netherlands, who have been attracted to the Croatian market's relatively low valuation and attractive dividend yields. However, this influx of foreign capital has been met with resistance from local investors, who feel that the listing has disrupted the market's dynamics and created uncertainty. As a result, the ING-GRAD index's listing has been seen as a double-edged sword, bringing in much-needed capital but also exacerbating existing market tensions.

Another factor contributing to the decline of the Croatian equity market is the economic uncertainty surrounding Brexit and the ongoing pandemic. The Croatian economy has been heavily reliant on tourism, which has been severely impacted by the pandemic, leading to a decline in investor confidence. Furthermore, the uncertainty surrounding Brexit has led to a decline in cross-border investments, which has further exacerbated the market's decline.

The ING-GRAD Index: A Breakdown of its Performance

Key Metrics:

• Year-to-date decline: -18.2%
• Largest single-day decline: -6.5%
• Longest losing streak: 5 consecutive days

The ING-GRAD index has been marked by significant volatility in recent months, with its value plummeting by 18.2% since the start of the year. This decline has been driven by a combination of factors, including the economic uncertainty surrounding Brexit and the pandemic, as well as the disruption caused by the listing of the ING-GRAD index.

Sector-wise Performance:

• Banking sector: -25.1%
• Real estate sector: -20.5%
• Telecommunications sector: -15.6%

The ING-GRAD index's performance has been sector-wise, with the banking sector bearing the brunt of the decline. This is largely due to the impact of the pandemic on the financial sector, as well as the European Central Bank's tightening monetary policy. The real estate sector has also been affected, with the decline in investor confidence leading to a decrease in property prices. The telecommunications sector has been the least affected, with its performance driven by the growth of digital services.

Company-wise Performance:

• ING Group: -12.5%
• GRAD Group: -20.8%
• Other listed companies: -15.2%

The performance of listed companies has also been affected by the decline of the ING-GRAD index. The ING Group, which is the largest component of the index, has seen its value decline by 12.5% since the start of the year. The GRAD Group, which is the second-largest component of the index, has seen its value decline by 20.8%. Other listed companies have also been affected, with their values declining by an average of 15.2%.

The Role of Central Bank in Market Stabilization

The Croatian National Bank has been under pressure to intervene in the market and stabilize the ING-GRAD index. However, the bank has maintained a policy of neutrality, arguing that any intervention would be inappropriate and potentially destabilizing. Instead, the bank has been focusing on supporting businesses and ensuring a stable financial system.

Key Actions:

• Monetary policy adjustment: None
• Capital controls: Imposed in March 2020 to protect the economy from the pandemic
• Deposit insurance: Increased to 100% to reassure depositors

The Croatian National Bank has taken several measures to support the economy and stabilize the market. These measures have included no change to monetary policy, the imposition of capital controls in March 2020, and an increase in deposit insurance to 100% to reassure depositors.

The Impact of the Listing on the Overall Market

The listing of the ING-GRAD index has had a significant impact on the overall Croatian equity market. The influx of foreign capital has disrupted the market's dynamics and created uncertainty, leading to a decline in investor confidence.

Key Challenges:

• Market fragmentation: The listing has created a fragmented market, with investors having to deal with multiple platforms and exchanges
• Increased complexity: The listing has increased the complexity of the market, with investors having to navigate new regulations and rules
• Decreased liquidity: The listing has led to decreased liquidity in the market, making it more difficult for investors to buy and sell securities

The listing of the ING-GRAD index has created several challenges for the Croatian equity market. These challenges include market fragmentation, increased complexity, and decreased liquidity.

Analysis and Insights

The decline of the ING-GRAD index and the Croatian equity market as a whole is a complex issue with multiple factors contributing to its decline. The economic uncertainty surrounding Brexit and the pandemic has had a significant impact on investor confidence, leading to a decline in cross-border investments and a decrease in investor participation.

Key Takeaways:

• The ING-GRAD index's listing has disrupted the market's dynamics and created uncertainty
• The Croatian equity market is experiencing economic uncertainty and decreased investor confidence
• The listing has led to market fragmentation, increased complexity, and decreased liquidity

The Croatian equity market's decline