BVB indices - hit by the uncertainty brought by the electoral period

The evolution of the Bucharest Stock Exchange (BVB) was massively influenced, in the last quarter of last year, by the electoral period that culminated in the scandal of the presidential elections canceled following the decision of the Constitutional Court, the election being resumed this spring.

The BET index, of the twenty most liquid securities of our market, had a 5.1% decline, to 16,721 points, while the BET-BK index, the benchmark of return of equity investment funds, depreciated by almost 5%, to 3,139 points, in a period in which the reporting season for the first nine months of 2023, which outlines the prospects of dividends that companies on the BVB can pay, and our country's entry into the Schengen area were put on the back burner by the tumult on the political scene.

• All major US indices hit historic highs

In the US, markets were primarily driven by Donald Trump's victory in the presidential election, with Republicans also taking control of the US Congress. Investors saw Trump's agenda, which included possible tax cuts and deregulation, as favorable for businesses and companies. In addition, the US economy is performing better than expected and the prospects for Artificial Intelligence are still fueling company results.

The S&P 500 index rose 2.1% in the last quarter of the year, while the Dow Jones Industrial Average rose just 0.5%. The Nasdaq Composite, a basket of knowledge-intensive companies, rose 6.2%, with all U.S. stock baskets hitting new all-time highs in the last three months of 2024.

On our side of the Atlantic, where the European Central Bank has cut its key interest rate twice by 25 basis points, economies are struggling and the political scene is marked by the proliferation of extremist movements, the Stoxx 600 index fell 2.9%, while the German DAX rose 3%. In London, the FTSE index fell 0.8% in the last quarter of last year.

• TTS, One and Aquila - among the biggest decliners in BET

On the Bucharest Stock Exchange, the BET-XT index, of the thirty most liquid shares of our market, had a decrease of 4.8%, to 1,445 points, in a period in which, in addition to the election scandal, Fitch revised Romania's outlook to negative, among the reasons cited by the rating agency being the political uncertainty that will probably have a significant negative effect on fiscal consolidation, a budget deficit of 8.2% for last year and reduced economic growth. In this context, seventeen of the twenty shares in the BET index had declines, in the fourth quarter of last year, the increases of the other three being slight.

The shares of the Danube freight carrier Transport Trade Services depreciated by 30.3%, the biggest decline in the main basket of shares of our market. The company reported a loss for the third quarter, compared to a profit in the same period last year. The issuer gained following the outbreak of the conflict in Ukraine, which massively increased the company's revenues and profits, but now the activity is normalizing, returning to near pre-war levels.

Shares of real estate developer One United Properties have been in a continuous decline throughout last year, with a 22.5% drop in the fourth quarter, the latest financial results reported, namely profit growth and margin improvement, failing to stop the downward trend. A series of corporate operations, which may have brought some distrust among investors, uncertainty regarding the fiscal framework, the Nordis scandal that probably affected the entire construction sector and a series of unfavorable press articles for the company are reasons that may explain the decline in One shares.

Shares of drugmaker Antibiotice fell 22.7%, primarily as a result of Infinity Capital Investments' sale of 16% of the company through a private placement at a price 20% below market price. Shares of consumer goods distribution and logistics company Aquila fell 19.5% in the last three months of last year as the issuer reported a decline in third-quarter profit. Shares of construction materials producer TeraPlast fell 7.9% in the same period.

• Small declines for defensive companies, good dividend payers

The shares of oil and gas producer OMV Petrom were on a consolidation, in the last quarter of last year, given that the company reported a 54% increase in profitability in the first nine months, due to the lack of a "solidarity contribution", which outlines a year 2025 with consistent dividends. The issuer has assumed a policy of increasing dividends, which favors it for buy-and-hold approaches. In contrast, Romgaz, OMV Petrom's partner in the Neptun Deep project, distributed only 20% of its profit as dividends last year, compared to full distributions in other years, and the investment requirement reduces the chances of a large allocation next year. In fact, the company, whose shares depreciated by 7.6% in the last quarter of 2024, issued bonds for 500 million euros, precisely to finance investments.

Hidroelectrica shares, a defensive company with constant dividend distributions, also suitable for a buy-and-hold approach, were in a consolidation in the last quarter of last year, a dynamic similar to that of Nuclearelectrica shares. The operator of the Cernavoda power plant has to make important investments, including reactors 3 and 4, so analysts estimate lower dividend distribution rates than in the last few years.

The shares of utility companies also had, by and large, lateral movements. Transelectrica shares fell by 4.1% in the last quarter of the year, while Electrica shares depreciated by 3.5%, and Transgaz shares rose by 2%.

• BRD shares fall more sharply than Banca Transilvania shares

Banca Transilvania shares fell by 2.3% in the last three months of last year, while BRD-Groupe Societe Generale shares fell by 11.2%, the difference probably being due to the results of the two credit institutions. The Cluj-based bank announced an increase of almost 150% in net profit for the third quarter, largely due to the reflection in the financial statements of the acquisition of OTP Bank Romania, but also due to operational activity, while BRD's profitability decreased due to the net cost of risk and the "turnover tax".

• BET-FI - the only index to rise on the BVB in the fourth quarter

The BET-FI index, of former SIFs plus Fondul Proprietatea, was the only basket of shares on the BVB that ended the last quarter of last year in positive territory, with a slight appreciation of 0.17%. The evolution is due, first of all, to the increase in shares of the former SIF Muntenia, currently Longshield Investment Group, which rose by 10.6% amid the launch of a buyback offer for 18 million of its own shares, at a price of 1.95 lei per share, above the market price at the time of the operation's approval by the ASF, of 1.72 lei.

At the end of December, SIFs were trading at discounts between price and Net Asset Value (NAV) ranging between 68% for Infinity Capital Investments and Lion Capital, and 42% for Longshield Investment. For FP, the discount was 52%, above the manager Franklin Templeton's target of below 15%.

• Ministry of Finance raised 2.6 billion lei through the latest issue of Fidelis government bonds

The Ministry of Finance raised 2.6 billion lei or 523.1 million euros through the latest Fidelis government bond offering last year. The offering was structured into six tranches, four in lei and two in euros, with interest rates ranging from 7.9% to 6.45% for the tranches in the national currency, and 3.75% to 5.75% for those in the European currency.

At the end of last year, the offering of Green Tech International, a group that deals with the supply of ecological heat for various types of clients, took place, an operation in which, out of a total of two million offered securities, 534,422 shares were subscribed, of which 25,500 were allocated to the institutional investors tranche and 508,922 to retail investors. The final price of the offer was 15 lei per share, with the company to be listed on the Bucharest Stock Exchange.

Read Budget Disaster and Political Instability in Romania