BVB indecision - investors await information on this year's outlook

The Bucharest Stock Exchange (BVB) indices saw slight increases amid reduced liquidity in the first month of the year, thus reflecting the state of investors awaiting information on the domestic economic and political situation, company results and dividend proposals, in a turbulent international geopolitical and macroeconomic context.

The BET index, the twenty most liquid stocks in our market, advanced 1.67% in January, to 16,999 points, while the BET-BK index, the benchmark for the performance of equity investment funds, appreciated by 1.68%, to 1,393 points.

For this year, our country's budget project is built with a deficit of 7%, compared to 8.65% last year, while economic growth is estimated at 2.5% of GDP. The projection includes freezing part of the budget expenditures, but according to analysts, the measures are not sufficient to reduce the deficit, so revenues must be increased, which may imply tax increases. It is the picture of an economy in imbalance, a situation illustrated by the latest decision of S&P Global Ratings which, following Fitch in December, reduced the credit rating outlook for our country to "negative" from "stable", while still keeping us in the "investment-recommended" category.

• Trade War and Artificial Intelligence; the First Moves of Trump's Second Term

Donald Trump began his second term as president of the United States with an imperial leadership approach to international relations. The Republican imposed 25% tariffs on all steel and aluminum imports, additional 10% tariffs on imports from China, announced tariffs on Mexico and Canada that he then postponed, and suggests that he will impose tariffs on the European Union, thus increasing the risk of a global trade war. He began negotiating with Russia to stop the war in Ukraine, negotiations from which Europe was excluded, and at the moment the conditions under which any eventual peace on the border of Europe will be concluded and even the structure of the North Atlantic Alliance are unclear.

Domestically, Trump announced the launch of a project called Stargate that includes big names from the American tech industry, for the development of artificial intelligence infrastructure in the US, the investment amounting to $ 500 billion. On the other hand, the launch of the AI application of the Chinese startup DeepSeek, whose performance is comparable to those of the applications of large American companies, but which is said to have required much lower costs, has questioned the need for such large investments in the development of artificial intelligence.

In this general context, to which are added the results reported by American companies for the fourth quarter of last year that largely exceeded expectations, the S&P 500 index rose by 2.7% in January, while the Dow Jones appreciated by 4.7%. The Nasdaq Composite, of companies operating in knowledge-intensive sectors, rose by 1.6%, in a month in which the Federal Reserve kept interest rates unchanged, while inflation began to rise again.

On our side of the Atlantic, where the disinflationary process has also stopped and the European Central Bank has cut interest rates by 25 basis points, the Stoxx 600 index appreciated by 6.3% last month, while in Frankfurt the DAX index rose by 9.2%. In London, the FTSE 100 rose by 6.1% last month.

• Transelectrica, TTS and Electrica - among the biggest gains in BET

On the Bucharest Stock Exchange, the BET-XT index, of the thirty most liquid stocks on our market, appreciated by 1.5% last month, in anticipation of the season of preliminary financial reporting by issuers for last year, which outlines the prospects for dividend allocation.

Shares of utility company Transelectrica, those of marine freight carrier Transport Trade Services and energy supplier and distributor Electrica, had among the biggest gains in the BET index, in the first month of the year.

The electricity transporter, whose shares rose by 10.3% in the first month of the year, doubled its profit in the first three quarters of 2024, and the situation in the energy market in the Republic of Moldova calls for massive electricity exports from Romania, which may lead to an increase in Transelectrica's revenues, according to an analysis report by Prime Transaction, signed by Alin Brendea.

Also, the trend of increasing profitability of the utilities sector is expected to continue, amid higher tariffs and a higher rate of return accepted by ANRE in calculating future collected tariffs, the brokerage company's reports also show.

Electrica shares appreciated by 6.2% last month, the reason for the increase being probably related to the increase in tariffs charged by the company this year approved by ANRE. In addition, the company announced that it has taken legal action demanding the recalculation of ANRE tariffs for both the current year and last year, according to the report signed by Alin Brendea.

Transport Trade Services shares appreciated by 7.5% in January, after a 47% decline last year, caused by the massive erosion of financial results that actually represents a normalization after two exceptional years. For now, the evolution represents only a weak rally in a long-term downward trend.

• OMV Petrom to pay 6% dividend plus special allocations; Romgaz prepares to enter natural gas market for residential and non-residential customers

OMV Petrom shares rose 2.8% last month, ahead of the company's 2024 financial results and dividend proposal. The oil and gas producer reported a slight decline in revenue and a net profit of 4.2 billion lei, up 4%, while the proposed basic dividend is 0.0444 lei/share, equivalent to a gross yield of 6%. Also, mid-year, the company's board will decide whether to propose a special dividend allocation. Also last month, news broke that Austrian group OMV had signed a five-year agreement with Uniper for the delivery of natural gas from the Neptun Deep project in the Black Sea, starting in 2027.

Romgaz shares, OMV Petrom's partner in the Neptun Deep project, rose 5.2% in January as gas prices rose across Europe and the company is set to enter the market for supplying natural gas to residential and non-residential customers. On the other hand, given the massive investments it has to make, the state may exempt the company from paying 90% of its profits as dividends.

Hidroelectrica shares have been sideways in the past month, with the energy producer and supplier being one of the largest dividend issuers on the BVB. Nuclearelectrica shares also traded in a consolidation, but given the financing needs of the company's investments, the probability of a high dividend distribution rate is lower than in the case of Hidro.

• TeraPlast and Antibiotice shares down; One United shares' nominal value strengthened The declines include

TeraPlast, which fell 8.3% last month, continuing a downward trend from 2024 amid weaker financial results. Shares of drugmaker Antibiotice Iaşi, which performed well last year and propelled them into the BET index, fell 3.5%, without any obvious fundamental reasons.

One United Properties has strengthened its nominal value of shares while reducing the number of shares, with 50 shares with a nominal value of 0.2 lei each becoming one share with a nominal value of 10 lei. The price of One shares has been on a downward trend since the first part of last year, as the real estate market is affected by the Nordis scandal, a series of negative articles related to the company have appeared in the press, and the fiscal framework and general economic environment in our country is uncertain.

• Trading discounts of between 68% for Infinity Capital Investments and Lion Capital, respectively 42% in the case of Longshield Investment

The BET-FI index, of the former SIFs plus Fondul Proprietatea, had an advance of 1.56% in the first month of the year, primarily due to FP shares, which appreciated by 7.6%. The evolution shows, first of all, that the pressure exerted by the sales of pension funds has diminished massively. The fund ended 2024 with a net profit of 339 million lei, compared to a loss of 904 million lei in the previous year, which creates the premises for a dividend distribution with significant yields.

At the end of January, SIFs were trading at discounts between price and Net Asset Value (NAV) of between 68% for Lion Capital and Infinity Capital Investments, respectively 44% in the case of Longshield Investment. For FP, the discount was 52%, above the manager Franklin Templeton's target of below 15%.

• Autonom Services, Norofert and OMRO IFN listed bonds

Autonom Services listed a new bond issue worth 30 million euros on the Bucharest Stock Exchange in January, the securities being linked to sustainability objectives. Norofert and OMRO IFN listed bonds on the Multilateral Trading System, worth seven million lei and 1.56 million euros, respectively.

The total value of transactions with securities listed on the BVB Main Segment was 879 million lei, 78.7% below that of December last year, when the amount was massively boosted by a Fidelis government bond issue. The average daily value of transfers also fell by 78.7%, to 48.8 million lei, for the same reporting period, a decline also influenced by Fidelis, as shown in the BVB Monthly Bulletin.

With transactions worth 159.8 million lei, Banca Transilvania shares occupy the first position in the top turnover of January, on the second position of the podium being OMV Petrom shares, which accumulated transfers of 71.6 million lei. The top is completed by exchanges with Romgaz shares, which amounted to about 46.1 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 about 355.1 billion lei, up 1.4% compared to that recorded at the end of December, according to the monthly report of the BVB.

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