Brokers: Great expectations for the dividends of the SIFs cause their stocks to rise

• SIF Moldova, the leader of the pack

Brokers say that one of the reasons the stocks of the five SIFs have risen over the past two days, is the fact that investors have high hopes over the dividends which will be paid out this year.

The segment was distinguished itself from the remaining shares of the Bucharest Stock Exchange, as the BET-FI index, which tracks its evolution, ended yesterday's session with a gain of 1.05%, after having increased 2.64% on Wednesday, as the market's main index, BET-C, only gained 0.35% yesterday, after dropping 0.18% on the previous day.

The stock of SIF2 outshone its peers, rising 3.85%, after rising 6.36% on Wednesday.

"The rise of the prices of the SIFs is caused by several events which have a short and medium term effect", said Mihai Chişu, a broker at IFB Finwest, who went on to say: "First of all, we have the fact that the last step of the process to raise the holding limit in the SIFs was carried out by publishing the law in the Official Gazette, which caused a lot of interest in those who wish to own more than 1% of the SIFs. Also, the interest in these shares comes from the dividends which those companies are expected to pay out. The sale of the stakes of BCR has generated a high profit in most of the SIFs, exceptionally so in SIF2 (ed. note: Moldova) and SIF3 (ed. note: Transilvania). Because of this, if we look to the past and expect a similar dividend payout ratio, we see that their yields are extremely generous, high above the bank interest rates.

Taking into account the aforementioned elements, I estimate that the segment of the SIFs can start the year well and will continue to be appreciated by investors, which will lead to higher volumes and cause their prices to rise".

Cristian Negoiţă, of "Confident Invest", says that one of the factors which have influenced the prices of the SIFs is the press release issued by SIF2 announcing the plan to ask shareholders to allow its board of directors to conduct share capital increases and stock buybacks, as well their intention to eliminate the quorum barriers for the General Shareholder Meeting.

"At the same time, following the sale of their stakes in BCR, the SIFs are becoming interesting considering their potential returns, with SIF2 being the most attractive", Mr. Negoiţă said.

In his opinion, the SIFs have a high potential to see significant rises in the first half of the year, ahead of their General Shareholder Meeting.

According to Simion Tihon, a broker with "Prime Transaction", the reason why SIF Moldova (SIF2) is rising could be that, of the five companies, only SIF2 and SIF3 were fully paid in cash for the sale of their stakes in BCR to Erste, which could lead to high dividend yields". According to Mr. Tihon, the fact that SIF2 (Moldova) rose more than the others could also be explained by the fact that the company seems to be implementing corporate governance in a more obvious manner.

Nicu Grigoraş, a broker with "Intercapital Invest", considers that the rise of the shares of the five SIFs began once the trading volume increased: "After a few weeks of stability, when domestic investors most likely waited for the year 2012 to begin on the international financial markets, as well as the coming into effect of the law concerning the raising of the holding limit, trading volumes began to increase. The very good news concerning the raising of the holding limit, as well as expectations on the dividend payouts, which may be very generous, especially in the case of SIF2 and SIF3, will cause a positive reaction from investors, which could last a few weeks, depending on the foreign context.

The evolution of the five SIFs can very easily be decorrelated, in the near future, from the indexes of the BSE and the foreign markets, as long as the latter don't post any consistent drops".

The law concerning the amendment of the holding limit in the SIFs, from 1% to 5%, came into effect, after being published on Tuesday in the Official Gazette.

From that day, the five financial investment companies have up to 60 days to summon the General Shareholder Meeting and change they by-laws or, as the case may be, their articles of incorporation.

The raising of the holding limit will allow investors to buy blocks of up to 5% of each SIF.

In mid-September, Erste announced that it had concluded a principle agreement with four of the SIFs, namely SIF Banat-Crişana, SIF Transilvania, SIF Muntenia and SIF Oltenia, to acquire a block of shares of 24.12% of the shares of BCR, through several operations which involve payment in cash for the shares, as well as trading BCR stock for Erste shares. SIF Moldova subsequently accepted the proposal made by Erste.