Welcome To ZSE - Zagreb Stock Experts
Croatia Economy Part I
Croatia Economics Base, Stock Exchange and Future of Developing the Country
Croatia is a country with a turbulent and interesting history which shaped the nation and the economy. Croatia made it from the chains of communism as a part of former Yugoslavia to a member state of the European Union. After the country’s independence in 1991, and the aftermath war which lasted for the next five years, Croatia worked hard to reconstruct the country and put its economy back on the feet.
The Zagreb Stock Exchange
The Zagreb Stock Exchange was established in 1907. After that, it was closed and reopened multiple times. The first time it closed in 1911 just to reopen after World War 1 in 1919. In that period, the stock exchange was very active and counted a number of foreign customers, mostly from Vienna and Prague. The stock exchange had a positive impact on the economic development, finances and banking in Croatia. Not long afterward and surviving the Second World War, the Croatian Stock Exchange was suspended under the socialist regime in 1945. The Stock Exchange was sleeping for more than 40 years just to see the light of the day again in 1991 after declaring independence. In the dark hour, 25 banks and two insurance companies formed the Zagreb Stock Exchange as the main point for securities exchange.
Between 1995 and 2000, after the introduction of the electronic trading system, the capitalization of the market increased ten times. Since then on, the market has been growing strong with 150 companies, and it consists now of two sections; the Regulated Market and the Multilateral Trading Facility. By now, Croatia is participating in regional activities, like the establishment of the SEE Link in cooperation with Bulgaria and Macedonia to integrate the stock exchanges of the three countries for a regional infrastructure. It also started to introduce novelties in the field, as for example by establishing the Zagreb Stock Market Awards on an annual basis.
That Croatia is becoming a leader in the region also shows the acquisition of the Ljubljana Stock Exchange last year. Since the financial systems are similar in the two neighbor countries, positive outcomes are expected for both stock exchange markets. The Zagreb Stock Exchange can be seen as the little leader in the region in terms of securities markets by providing high-quality services and cost-efficient solutions to customers and clients. Entering the EU in 2013, only strengthened Croatia’s position in the region and its economy.
Capital Market Regulation
The capital market and the financial non-banking sector is supervised and regulated by the Croatian Financial Services Supervisory Agency or HANFA (from Croatian: Hrvatska agencija za nadzor financijskih usluga). It is in charge of regulating the financial market, services, and legal and physical persons who provide those services.
Their main goal is to promote stability of the market by keeping the market transparent and trustworthy. HANFA also reports regularly to consumers and fosters the trust between market participants. Besides regulating the Zagreb Stock Exchange, HANFA also regulates investment companies, insurance companies, brokers, investment advisors, and intermediaries.
The Agency was established in 2005 by merging three other similar bodies (the Croatian Securities Commission, Agency for Supervision of Pension Funds and Insurance, and the Financial Services Supervisory Agency). HANFA has significant powers granted under law, and it has the right to sanction, suspend and ban companies from the market who do not work accordingly. HANFA is accountable to the Croatian Parliament.
The Agency has the right to participate in drafting legislation which relates to the capital market. It makes sure that legislation is appropriately implemented by all subjects. The Agency maintains a warning list on its official website to warn people about unregistered subjects and companies.
All of this indicates that Croatia takes a serious stand towards market regulation and the Stock Exchange. Therefore, the country attracts foreign investments whereby the Stock Exchange offers the best service to its domestic and international clients. This has been a huge improvement since Croatia fought really hard to regain its reputation after the 1990's privatization scandal and mistrust by the international community. Nowadays, it functions as a stable country which can keep up with international standards. The international community recognized the potential and qualities Croatia offers and seized their opportunity to invest in the Croatian futures and securities market.
The Croatian Multilateral Trading Facility
The Multilateral Trading Facility (MTF) is a system which automatically links supply and demand in financial instruments for interested third parties. The facility or platform can be operated by an investment company, for example, as long as it is HANFA certified.
The MTF is somewhat riskier because it functions under less transparent conditions in comparison to the regulated market. The MTF has to define and implement certain transparency rules and procedures like:
- Access to the system of operations
- Eligibility criteria for putting financial instruments in the market
- Trading in financial instruments
The MTF has to provide sufficient information on the tradable instruments in order to facilitate the trading process and help investors and clients. It has to ensure fair and correct trading.
Economy of Croatia
Croatia had a hard time to establish an independent economy during its time under the socialist regime as a part of former Yugoslavia. After getting rid of the chains of socialism and the war, Croatia started to rebuild itself and the economy. The economy of Croatia is mainly oriented towards the service industry, i.e. tertiary sector. This industry accounts for 70% of the GDP. This is not a surprise given that Croatia is strongly focused on the tourism industry and is one of the leading countries in the industry in Europe. Croatia’s economy was on its way up after the war, but the crisis 2007/2008 did not go by with no consequences. Croatia was affected as the majority of European countries. Before the crisis, the economic growth was at 4%- 5% annually. Croatian citizens enjoyed great economic and social opportunities since incomes doubled in the post-war period until 2007.