Appreciations on our stock market, in the month in which investors received the money from the sale of Hidroelectrica

The indices of the Bucharest Stock Exchange (BVB) had the biggest increases of this year, in September, a month in which the international stock markets faced significant declines, which shows that the factors underlying our market's appreciation are internal. The BET index of the twenty most liquid BSE stocks hit new all-time highs in September, ending the month up 8.2% at 14,338 points.

The BET-BK index, the performance benchmark for equity investment funds, appreciated by 8.9% to 2,676 points, while the BETAeRO index, of relevant companies in our market's Multilateral Trading System, advanced by 2.7%, to 919 points.

• US Treasury yields rose to their highest levels since 2007

In the United States, equity markets are undergoing a substantial correction as investors begin to digest the fact that interest rates are going to stay at high levels for a longer period of time. The Federal Reserve kept its key interest rate at 5.25%-5.5% at its September meeting, but signaled that rates may rise further to tame inflation.

The yield on US Treasuries with long maturities (ten or thirty years) rose to levels not seen since 2007, as stocks fell. The S&P 500 index fell by 4.9%, while the Nasdaq Composite index, of companies active in knowledge-intensive fields, depreciated by 5.8% last month. In Europe, where data shows economies are more fragile than across the Atlantic, the Central Bank raised its key rate to a record high of 4 percent, but signaled that this cycle's rate hikes were likely over. The pan-European Stoxx 600 index fell 1.7% in September, while the DAX40 index of the Frankfurt Stock Exchange fell 3.5%.

• BVB preset a reference for FP shares on the ex-dividend date, so that indices such as Price Return did not reflect the massive correction of the fund's quotation

On the BSE, shares were completely uncorrelated with the declines in international markets, recording strong gains in the month in which the largest dividend payment in the history of our stock exchange was made. The developments also defied the measures announced by the Government to patch the budget, which shows that investors are probably used to such things and do not see a major impact on issuers.

At the end of September, Fondul Proprietatea distributed over nine billion lei from the money collected on the package held in Hidroelectrica. BVB decided to preset a reference price for FP shares on the ex-dividend date (September 7), so that Price Return indices (which only include price developments, without dividends) containing securities of the investment fund did not reflect the correction massive ex-data of 81%, from reality. Without this BVB decision, the indices would have had smaller monthly increases.

There is an idea in the market that a good part of the money paid by FP will return to the main stocks on the BSE, which will support prices. So perhaps some investors bought in anticipation, which can explain, to a certain extent, the increases before the Fund's dividend was paid. In addition, it follows that other companies, such as OMV Petrom or Banca Transilvania, will pay dividends, which is an attraction for investors. Last but not least, Q2/H1 financial results likely supported share prices, with stock market performance in some cases correlating with reported results.

• The Hidroelectrica offer generated revenues of 12.5 million lei for BVB, an amount that will be reflected in the results of the third quarter

The shares of the Bucharest Stock Exchange rose by 25.1%, to 65.8 lei, in September, an appreciation that continued in the first days of October, and from the beginning of the year until the end of last week, the price of BVB securities doubled, the stock market valuation of our capital market operator reaching about 580 million lei, a historical record.

On the other hand, the company's financial results deteriorated massively, the issuer's net profit for the first six months of the year being 3.72 million lei, 59% below that of the first half of last year. Admittedly, it is a cyclical drop - on the one hand, the reporting base is high (in the first six months of last year, BVB benefited from the volatility created by the war in Ukraine), and on the other hand, the results do not include the Hidroelectrica offer and post-listing trading. So, after the first nine months the picture will be completely different, only the Hidro offer generating revenues of 12.5 million lei for the stock exchange, which will be reflected in the results of the third quarter.

The massive increase in capitalization and the sharp drop in profitability has caused the BVB share to have a Price to Earnings Ratio of over 100 (about 115 at the end of last week, taking into account the results of the last four quarters), a level that cannot be justified under any form of Hidroelectrica's listing or the prospect of operationalizing the Central Counterparty, which is entering its fourth year of delay.

The approach of the elections for the BVB Council, which will take place on November 22, is probably the main reason that explains the increase in the stock price of the stock exchange, which has been on a strong upward trend since 2022. Reports show that institutional investors were buying Romanians, who probably bought in order to have a greater voting power in the elections (in August this year, Romanian institutionalists had 81% of BVB, compared to 76% in December 2021 and 72% in December 2020). At the end of August, five of the seven Pillar II funds together had 20.5% of the BVB (Aripi and AZT Viitorul Tău did not hold stock exchange shares), and the SIFs had, in June, 30.2% of our market operator of capital, according to reports.

• Appreciation of 7.6% for the BET-NG index, of energy and utilities companies

Shares in natural gas carrier Transgaz ( TGN ) rose 15.4% last month, rebounding from a slide in August when the company reported a second-quarter loss that was narrower than the the same period of 2022. Last month, Transgaz announced the takeover of the operation, exploitation, dispatching and transportation of natural gas from the Republic of Moldova.

In a month in which the price of natural gas in Europe rose by 20%, the shares of Romgaz (SNG) appreciated by 11.1%, in a constant upward movement, which suggests purchases by some institutions. The company, whose activity is marked by seasonality, is a good dividend payer, with distributions including from reserves at the state's request. OMV Petrom (SNP) shares rose by 7.1% last month, an evolution that includes the dividend distribution with a yield of around 8%. The dynamics appear in a period of oil price appreciation, which reached, in September, the maximum of the last year.

The shares of the producer and supplier of electricity Hidroelectrica (H2O) increased by 6.2% in September, to 120 lei, 15% above the price at which the public offer ended in July. For the second quarter, the company reported a 58% increase in net profit, mainly due to favorable hydrological conditions.

Transelectrica (TEL) shares appreciated by 14.9%, the company reporting for the second quarter a net profit four times higher than that of the same period last year, the situation in the energy market being beneficial for the electricity carrier.

In this context, the BET-NG index, of energy and utility companies, had an increase of 7.6% in September, to 1,068 points, after reaching a new historical record during the month.

• Positive dynamics for banking institutions

Banking stocks have underperformed energy stars last month. On the one hand, the environment with high interest rates is beneficial for credit institutions, a fact that can be seen in the financial results, but on the other hand, the Government has announced a 2% tax on turnover for the next two years. The shares of Banca Transilvania (TLV) rose by 5.2% last month, in the context in which the credit institution will grant a dividend with a yield of 5%, while the shares of BRD-Groupe Societe Generale (BRD) appreciated with 6.4%. BRD did not grant dividends in 2023, but there are expectations in the market that the bank will come up with a proposal to shareholders by the end of the year.

• TeraPlast, Transport Trade Services and Purcari - among the best developments at BVB in September

In terms of growth, the shares of TeraPlast (TRP) were also noted, which appreciated by 14.1% last month, but the shares of the construction materials producer are on a multi-year downward trend, developed against the background of the deterioration of the financial situation of the company. Shares of Transport Trade Services (TTS) rose by 11.7% in September to a new all-time high, the shares of the Danube freight carrier being in a favorable context, determined by the conflict in Ukraine. Shares of Purcari Wineries ( WINE ) rose 11.1% last month, but are still below their highs since early last year, before Russia's invasion of Ukraine.

• Trading discounts between 67% for Lion Capital and 50% in the case of SIF Muntenia

The BET-FI index, of SIFs plus Fondul Proprietatea, rose by 10.1% last month, mainly as a result of the reporting of FP securities to the reference preset by BVB and the increase of SIF Muntenia securities (SIF4), by 13.5 %.

At the end of the month, the SIFs traded at discounts between the price and the Net Asset Unit Value (VUAN) between 65% for Lion Capital and 43% in the case of SIF Muntenia, while compared to the new reported Unit Net Asset, of 0.6319 lei, FP had a discount of 33%.

On September 25, FP shareholders voted to extend Franklin Templeton's administrator mandate by only one year, a proposal that had been put on the agenda at the request of the Ministry of Finance. Franklin Templeton wanted a new four-year mandate, but according to some sources in the market, the state wants to remove the American administrator from the helm of FP. The largest shareholders of FP are the private pension funds Pillar II, so that, very probably, the Finances, which have 7% of the voting rights of FP, imposed their will through the competition of some pension funds.

• Average daily transactions with Main Market securities of 91 million lei, 50% more than the previous month

The last offering of Fidelis government securities accumulated subscriptions of only 299 million euros, far below the amount collected through the previous operation, of 483 million euros, given the lower interest rates offered.

In the recently ended month, the average daily value of transfers with securities listed in the Regulated Market amounted to 91.5 million lei, 50% more than in August, as shown in the BVB Monthly Bulletin.

With transactions of 400 million lei, FP shares occupied the first position in the circulation top last month, followed by H2O titles, which accumulated transfers of 365 million lei. The podium is completed by exchanges with TLV titles, which amounted to approximately 267 million lei.

At the end of last month, the market value of all companies listed on the Main Segment of our capital market (including Erste Group Bank) was around 275 billion lei, slightly higher than that recorded at the end of August, given that the increases of most securities were canceled by the massive reduction in the valuation of Fondul Proprietatea.