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The indices of the Bucharest Stock Exchange (BVB) finished 2024 with a slight increase, after diametrically opposed developments in the two halves of the year.
In the first seven months, stocks on our market marked a series of new historical records, in an internationally favorable environment for risky assets, boosted by internal factors such as financial results and dividends paid by many companies, constant purchases by pension funds, and a lower supply of shares compared to the increasing demand. Later, the election period, which culminated with the Constitutional Court's annulment of the first round of the presidential election won by the populist, far-right candidate Călin Georgescu, whose pro-Russian rhetoric raised concerns among investors regarding the country's European and NATO perspectives, led to a sharp decline at BVB.
Additionally, in December, Fitch revised Romania's outlook to negative, citing political uncertainty, which would likely have a significant negative impact on fiscal consolidation, a budget deficit of over 8% for the previous year, and the outlook for low economic growth.
The BET Index, which tracks the twenty most liquid stocks on the BVB, ended the year with an 8.8% increase, at 16,721 points, but was 11% below the historical high of 18,749 points reached on July 18. Dividends continued to significantly contribute to returns, so the BET-TRN index, which reflects both the price evolution of the BET stocks and the reinvestment of net dividends, saw a 15.5% increase, significantly above the inflation rate, which stood at 5.1% year-over-year in December, according to data from the National Institute of Statistics.
• Over 20% appreciation for U.S. stocks for the second consecutive year
In the United States, the stock market appreciated by over 20% for the second consecutive year in 2024, supported by solid U.S. economic growth, interest rate cuts by the Federal Reserve amid disinflationary trends, sustained enthusiasm regarding the potential of artificial intelligence, and the election of Donald Trump as president, whose agenda was perceived by investors as beneficial for the economy and the stock market. In this context, the S&P 500 rose by 25.7%, while the Dow Jones Industrial Average increased by 12.9%. The Nasdaq Composite Index, which tracks companies in knowledge-intensive industries, saw a 28.6% increase.
On our side of the Atlantic, where the European Central Bank also started cutting interest rates but the tech sector is much weaker than in the U.S., the economies are struggling, and the political scene is marked by the rise of extremist movements, stock market gains were more modest. Thus, the Stoxx 600 rose by 5.4%, while in London, the FTSE100 increased by 5.7%. A better performance was recorded by the DAX from the Frankfurt Stock Exchange, which saw an 18.8% increase last year.
• Antibiotice, Digi, and MedLife - among the best performers in the main BVB index
On the Bucharest Stock Exchange, the BET-XT index, which tracks the 30 most liquid stocks on our market, saw a 9.2% increase last year, while with dividends, the total gross return of the stock basket reached 15.3%.
Shares of Antibiotice Iaşi had a total return of around 90%, the highest in the BET index last year, mainly due to stock price appreciation, driven by exceptional financial results in the first part of the year and the company's expansion and diversification plans, for which it will benefit from European Union funds.
Shares of Sphera, which includes brands like KFC, Pizza Hut, and Taco Bell, posted a total return of 65%, mostly driven by price appreciation, due to strong profitability growth, expansion of its restaurant network, and dividend policies that attracted pension funds. The total return of Digi shares reached 48%, mainly driven by the sale of a fiber optic network by Digi Spain for up to 750 million euros and the inclusion of its shares in the MSCI indices. The company is set to acquire assets from Telekom Mobile and expanded into Belgium and Portugal last year.
MedLife shares rose by 45.7%, as the medical services provider returned to profitability and continued its development campaign through acquisitions. Aquila shares posted a total return of 33.3%, with the distribution and logistics company for the consumer goods market being, alongside Digi and MedLife, on the radar of private pension funds.
• Superior performance of Banca Transilvania shares compared to BRD
In a year when the EuroStoxx Banks index saw an appreciation of around 21%, shares of Banca Transilvania had a total return of 33.7%, with the stock price increasing by nearly 28%, while BRD shares posted a total return of 15.7%, with most of it coming from dividends.
The difference in performance can be explained by several factors, including the better financial results reported by the bank from Cluj, which acquired OTP Bank Romania, reflecting in the reports. Moreover, Banca Transilvania, which, in addition to dividends, rewards shareholders with free shares, likely has the largest free float among the major companies on BVB, making it a preferred investment for a wide range of investors.
• Energy stocks performance - OMV Petrom leads with the highest return, Nuclearelectrica declines
The energy index BET-NG increased by 7% last year, reaching 1,199 points, supported by the performance of oil and gas producers and utility companies.
Despite the decline in oil prices, OMV Petrom shares had a total return of 35.8%, facilitated by generous dividends, including a special distribution, and improved financial results due to the absence of the "solidarity contribution." Shares of Romgaz, OMV Petrom's partner in Neptun Deep, experienced a more sideways evolution, ending the year with a total return of 5.4%, as the distributed and expected dividends were much lower than in previous years.
Shares of Hidroelectrica, the energy producer and supplier, also experienced a sideways evolution, as the company's profitability decreased, but the total return was positive due to the high dividend paid. The company, of strategic importance to the country, is state-controlled and remains one of the main dividend issuers on BVB.
Nuclearelectrica shares followed a downward trend, ending last year with a negative total return, as the company reported declining profitability. Moreover, the energy producer needs to make significant investments, and analysts estimate lower dividend payout rates compared to previous years.
Transelectrica shares had a return of 26.2%, almost entirely due to the stock price increase in the spring-summer period when the company reported increased profitability and analysts considered the issuer had favorable prospects, given the increasing regulated tariffs and lower technological consumption costs.
Electrica shares posted a total return of 16%, due to the price increase in the first half of the year when the company's results significantly improved, and its shares were included in the FTSE Russell indices.
Shares of the natural gas transporter Transgaz had a total return of 26.2%, driven by the price increase in May-June when the company reported double profitability for the first quarter.
• One United, TTS, and Fondul Proprietatea - among the issuers with declines in BET
The shares of One United Properties, Transport Trade Services, and Fondul Proprietatea recorded the largest declines in the BET index last year. The real estate developer's stocks depreciated by 42.8%, with a total negative return of 38.8%, in a context marked by declining financial results, the Nordis scandal likely impacting the entire real estate sector in the country, and some uncertainty regarding the fiscal framework. Additionally, some of the issuer's corporate operations may have caused a lack of investor confidence.
The shares of the Danube freight transport company, Transport Trade Services, fell by 34% last year, as the company's financial results massively depreciated due to a negative base effect. The issuer benefitted from the outbreak of the conflict in Ukraine, but now its activity is normalizing, returning to pre-war levels. TeraPlast's shares were on a downward trend throughout the year, as the construction material manufacturer's reported results disappointed investors, with the company recording a loss after the first nine months of the year.
• BET-FI Index - the lowest appreciation among the main market baskets of stocks
The BET-FI index, composed of the former SIFs plus Fondul Proprietatea, saw an increase of 4.6% last year, reaching 62,020 points, the weakest appreciation among the main market's stock baskets. Fondul Proprietatea shares depreciated by 39.8% last year, with a total negative return of 28.3%, mainly due to the selling pressure from the Pilon II pension funds, which significantly reduced their holdings in FP. Additionally, the Ministry of Finance began putting pressure on the fund to conserve its portfolio, making the realization of its most important holdings through listing more difficult.
The former SIFs had share price increases between 10% for Lion Capital and 27.4% for Longshield Investment and Infinity Capital. Unfortunately, these funds are completely off the radar of retail investors and serious institutional investors, such as pension funds. By the end of December, the SIFs were trading at discounts to Net Asset Value (NAV) ranging from 69% for Infinity Capital Investments to 42% for Longshield Investment. For FP, the discount was 55%, above the manager Franklin Templeton's target of under 15%. The American manager decided not to run for a new mandate at the fund's helm.
The BETAeRO Index, composed of companies considered relevant to the Multilateral Trading System of our stock exchange, saw a decline of 10.8% last year, being the only stock basket at BVB to depreciate in 2024. This decline occurred as many issuers' results disappointed investors, and most important companies moved to the main market.
• Premier Energy completed the largest private IPO in the last five years; JT Grup Oil, Glissando Garden Center, Fort, and Immo Guru debuted on the AeRO Market
Premier Energy, a company in the energy industry, debuted last year on the Main Market of BVB, following an initial public offering through which it raised 695 million lei - the largest IPO of a private company in the last five years. On the AeRO Market, companies such as JT Grup Oil, Glissando Garden Center, Fort, and Immo Guru made their debut. Additionally, in late December, the Green Tech International offering took place, a group providing eco-friendly heating to various types of clients, and the company debuted at BVB on Friday.
The Ministry of Finance conducted six Fidelis government bond offerings last year, raising a record 16.4 billion lei (almost 3.3 billion euros) from the population, approximately 40% of the total value of all 20 Fidelis issuances conducted since August 2020.
At the end of last year, BVB investors had around 226,000 accounts, 26% more than at the end of 2023, according to data from the Investor Compensation Fund. The market capitalization of all companies listed on the Main Market reached 350 billion lei by the end of 2024, 19% more than in 2023. However, the average daily trading value decreased to 65.8 million lei, compared to 97.4 million lei in the previous year, when Hidroelectrica was listed, significantly pulling up the average, according to BVB data.
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