BVB indices did not have the strength to connect to the growth of international markets

The correction of the indices of the Bucharest Stock Exchange (BVB) that started in August continued in September, in contrast to the evolution of the main indices of the Western markets, which suggests the absence of internal growth vectors for our stock market.

The BET index, which reflects the evolution of the twenty most liquid securities on the BSE, fell by 2.93% in September, while the BET-BK index, the yield benchmark for equity investment funds, depreciated by 2.85%, in a month which, historically, was devoid of conclusive events for the local market. Overall, the indices are facing the most severe correction in the last two years, but even so the evolution from the beginning of the year to the end of last month remains remarkable, namely plus 14.6% for BET and plus 21.6% for the index BET-TRN, which reflects both the price evolution of the most liquid shares on our stock exchange and the reinvestment of net dividends.

• The Fed cut the key interest rate by 0.5%; traders assume another discount in November

The US Federal Reserve cut its key interest rate by 50 basis points (0.5%) in September, the first rate cut since 2020, showing that the US central bank has become more relaxed about inflation and focus more on supporting the economy to avoid a recession. In theory, lower interest rates are good for stocks, with lower borrowing costs for companies and higher valuations among the reasons. Additionally, traders expect the Fed to continue monetary easing, making a further 25 basis point rate cut almost certain in November, according to the CME FedWatch Tool.

In this context, the S&P 500 rose 2% last month, reaching a new all-time high, while the Dow Jones gained 1.85%. The Nasdaq Composite, of companies operating in knowledge-intensive fields, appreciated by 2.68%.

On our side of the Atlantic, where the European Central Bank cut interest rates by 25 basis points for the second time this year, the pan-European Stoxx 600 was down a slight 0.4%, while in Frankfurt the DAX40 appreciated by 2.2% last month.

• The Fiscal Council estimates that our country will have a budget deficit of 8% of GDP this year

At the Bucharest Stock Exchange, the indexes did not have the strength to connect to the growth of international markets, which suggests that the reasons are internal.

The companies' financial results for the first half of the year were mixed and broadly in line with market expectations, but strong share price appreciation over the past twelve months has boosted valuations, which may have made them less attractive to investors. Also, the absence of information to give an image of the dividends that the companies could offer, which will begin to take shape with the announcement of the results for the first nine months of the year, makes the investors wait, probably.

Last but not least, our country has a massive budget imbalance, with a deficit of 4.6% of GDP in the first eight months, almost 2% more than in the same period last year, and the Fiscal Council estimates a deficit of 8% at the end of the year. In addition, two rounds of elections are coming up, which may bring economic and fiscal changes, so it is possible that foreign institutional investors will reassess their perspectives towards Romania.

• Declines for energy and utility stocks; the Transelectrica quote depreciated by 22.5%

The BET-NG index, of energy and utility companies, had a 3% decline in September, with most of its constituent stocks falling.

In a month in which the Brent oil quotation, relevant for the European market, depreciated by almost 7%, the share price of OMV Petrom fell by 3.44%. Shares of Romgaz, OMV Petrom's partner in the Neptun Deep project, fell by 3.47% in September, a period in which the price of natural gas fell slightly, according to data from the Dutch hub TTF. The gas producer based in Mediaş wants to issue bonds worth a total of 1.5 billion euros, in several installments, the inaugural issue being worth 500 million euros.

Hidroelectrica shares appreciated by 1.96% last month, while Nuclearelectrica shares fell by 5.06%, with the operator of the Cernavodă plant reporting an almost 50% drop in profit in the second quarter due to the price lower of electricity.

Transelectrica shares have depreciated by 22.48% in the past month in relatively high-volume sessions, suggesting some institutional selling, but despite the massive recent decline, the energy carrier's shares are still in early positive territory of the year. Starting in September, the regulated tariff for system services has decreased by 11%, according to a company announcement.

Transgaz shares depreciated by 4.37% last month, while Electrica shares declined by 6.68%. The electricity supplier and distributor wants to issue green bonds worth up to 500 million euros.

• Decline for securities of credit institutions

The main banking shares fell last month, by 3.83% for Banca Transilvania and 2.33% in the case of BRD-Groupe Societe Generale, without specific news that obviously influenced prices. At the end of the month, the credit institution from Cluj announced that it sold bonds worth 700 million euros, in the context of a request from investors of over 2.5 billion euros, the funds attracted will be used to finance sustainable projects.

Also in terms of declines in BET, there is a 14.22% decline in the real estate developer One United Properties, whose quarterly profit fell by 47%. The company carried out a capital increase by which it attracted 340 million lei from shareholders. Shares of river carrier Transport Trade Services fell 9.61% as the company reported a massive drop in profitability in the second quarter due to falling demand.

• Increases for new BET entrants

The shares of the companies Antibiotice and Premier Energy were included in the BET index last month, a fact that contributed to the evolution of the two titles, especially since, through the drug manufacturer from Iasi, investors can gain exposure to a new sector in the index, the pharmaceutical sector. Last month, Antibiotice shares rose 12.59%, while shares of the energy infrastructure company rose 2.94%.

Shares of Digi Communications and MedLife also rose last month, with the two companies among those to benefit from lower funding costs in the short and medium term. The medical services provider bought 80% of the Euromedica Baia Mare Group, which shows that it continues its policy of growth through acquisitions, while the telecommunications operator redeemed in advance a bond issue worth 450 million euros.

• Trading discounts between 69% for Infinity Capital Investments and Lion Capital, respectively 48% for Longshield Investment

The BET-FI index, of the former SIFs plus Fondul Proprietatea, had an advance of 1.54%, being the only basket of shares from BVB that appreciated last month, thanks to the evolution of the SIF titles.

At the end of the month, FP shareholders extended the mandate of Franklin Templeton's administrator for another year, until March 2026, and rejected the Ministry of Finance's request to preserve the current patrimony of the fund and prohibit the repurchase of its own shares. They also elected Ileana-Lăcrămioara Isărescu, the daughter of the BNR governor, Mugur Isărescu, to the FP Representatives Committee for a three-year term, while the second available place on the board remained vacant, as none of the candidates met the required number of votes.

Also last month, the fund made a public offer to buy back its own shares, which was oversubscribed almost six times, given that it was launched at a price about 70% above the market quotation. FP bought back 269 million of its own shares (both securities traded on BVB and GDRs in London), equivalent to 7.5% of the share capital.

At the former SIFs, Nicu Buică requested the termination of his mandate as General Director of SAI Muntenia Invest, the company that manages Longshield Investment Group (formerly SIF Muntenia), while Radu-Răzvan Străuţ resigned from his position as a member of to the Board of Directors and implicitly from the position of Vice-President of Lion Capital (former SIF Banat-Crişana). Lion Capital owns SAI Muntenia Invest, thus controlling Longshield Investment Group. In place of Radu Străuţ, Rachid El Lakis was provisionally appointed, who, according to LinkedIn, has been the head of the Investment Department at Lion for over five years.

At the end of the month, the SIFs traded at discounts between the price and the Net Asset Unit Value (VUAN) located between 69% for Infinity Capital Investments and Lion Capital, respectively 48% in the case of Longshield Investment Group (former SIF Muntenia). For FP, the discount was 44%, above administrator Franklin Templeton's goal of under 15%.

• CCP.RO shareholders approved the updated Business Plan of the Central Counterparty and the capital increase of the company by five million euros

The shareholders of CCP.RO Bucharest approved the updated Business Plan of the Central Counterpart, the capital increase of the company by five million euros, the license contract with Euronext Clearing and the contract with the new technological service provider, at the beginning of last month. Of the five million, three million euros represent the contribution of the BVB.

The new deadline by which CCP.RO must submit the complete file for authorization to the ASF is December 8. According to the updated Business Plan, the capital paid by CCP.RO shareholders up to now is 19.7 million euros, so that, taking into account the additional contribution of five million euros, it reaches 24.7 million euros. Adrian Tănase, the president of CCP.RO estimated that the entity intended to function as a central counterparty in our country will be operational in the second part of next year.