BVB indices - the best quarter this year

The evolution of the indices of the Bucharest Stock Exchange (BVB) was strongly decorrelated with that of the international markets in the third quarter of the year, the main shares of our stock exchange having consistent increases, in a context marked by the success of the Hidroelectrica (H2O) offer, the largest operation of this type in BVB history.

The BET index, of the twenty most liquid securities of our market, advanced 14.9% to 14,337 points, at a time when the BSE's main basket of shares reached a new all-time high. The BET-BK index, the yield benchmark of investment funds in shares, appreciated by 13.9%, in the third quarter of the year, up to 2,676 points, while the BETAeRO index, of companies considered relevant for the Multilateral System of Trading, it rose by only 5.5% to 919 points, which shows that small entrepreneurial companies in our market have entered a shadow cone.

• Corrections in the United States and Europe

In the United States, after hitting local highs in July, indices entered a corrective sequence as markets became increasingly convinced that interest rates will remain high for an extended period and the Federal Reserve hinted that it is possible rate increases to follow this year, depending on the economic situation. The prospect of tighter monetary policy continued to fuel a sell-off in US Treasuries, sending yields to record highs not seen since 2007, and stocks falling.

The S&P 500 lost 3.6% in the third quarter, while the Nasdaq Composite, of knowledge-intensive companies, fell 4.1%. In Europe, where the market structure is more defensive but economies have proved less robust than in the United States, the Stoxx 600 index depreciated by 2.5% in the third quarter, while in Frankfurt the The DAX40 fell by 4.7% in the July-September period.

• Listarea Hidro - principalul catalizator al creşterilor din ultimele luni de la BVB

At the Bucharest Stock Exchange, the event of the quarter was the listing of Hidroelectrica, the energy producer and supplier becoming the largest Romanian issuer on the BSE. The offer, through which Fondul Proprietatea sold its 19.94% holding in the company, was oversubscribed by both retail and institutional investors, closing at a price of 104 lei per share. After the listing, Hidro's shares followed an upward trend, ending the third quarter of the year at the price of 120 lei, about 15% above the offer price. In addition to the financial results related to the first half of the year, i.e. a profit increasing by 46%, which supported the share price, the evolution of the quote shows that investors did not consider the offer price overvalued, and probably some of those who did not manage to buy the quantity of shares they originally wanted they also acquired after the listing.

According to the opinions of brokers and analysts, the listing of Hidro was the main catalyst of the increases in the last months on the BVB. Basically, the shares started appreciating with the announcement of the offer, which shows that at that point the selling pressure exerted by the institutions collecting cash for the offer probably disappeared. As the operation was oversubscribed, some of the money placed by the investors returned to the accounts, so that the investors were able to buy other shares listed on the BSE. Fondul Proprietatea also distributed all the money collected on the Hidro package as dividends to shareholders, with the expectation being that a good part of the amount will return to the market, in shares of solid, dividend-paying companies. In addition, Hidroelectrica increases the chances of our market entering the emerging hierarchy according to MSCI, so that, probably, stock purchases were made in anticipation of the event.

In addition to Hidroelectrica's listing, dividend allocations and financial results published by some companies were elements that favored the appreciation of quotations.

On the other hand, the Government announced the implementation of some fiscal measures aimed at reducing the budget deficit, some of which had an impact on some companies on the BVB, but which did not affect share prices, which shows that investors are probably used to such things and I don't see a major impact on issuers.

• The price of BVB securities marked a series of historical highs, ahead of the elections for a new Council

Shares of Transport Trade Services (TTS) continued their upward trend started at the beginning of the year, with the shares of the Danube freight carrier advancing 37.3% in the third quarter, the best performance in the BET. The company is in a favorable context, given that Russia has terminated the agreement on the free passage of grain exports from Ukraine, so it relies on the redirection of commercial flows on bypass routes, including the Danube. The port operating activity exceeded that of river transport, and at the middle of the year TTS profit was 153% above that of the first six months of last year.

The shares of the Bucharest Stock Exchange rose by 31.6% in the third quarter, in a sequence of new historical highs. The assessments appear against the background of the listing of Hidroelectrica, but especially of the approaching elections for a new Council, which made Romanian institutional investors buy BVB shares, in order to have a greater voting power. This is how the stocks of the stock market ended up having a PER of over 100.

Shares of Aquila (AQ) appreciated 28.3% in the third quarter of 2023, the third best performance in the BET. The increase comes after last year saw the stock fall sharply in price despite reported results that continued to improve this year, so it's possible that some investors have started to see AQ's stock as attractive from an upside perspective. at the evaluations. For the first half of the year, the company of integrated distribution and logistics services for consumer goods reported a profit about 30% above that of the first six months of 2022.

• Consistent ratings for banks

In a period in which the Euro Stoxx Banks index had an oscillating evolution, BVB banks ticked off consistent appreciations in the third quarter, even though the Government announced a 2% turnover tax for the next two years . Banking institutions should benefit from rising interest rates, which can already be seen in the financial results already announced, and the prospect of dividend allocation, which in the case of Banca Transilvania has already materialized, probably has a positive effect on prices. In addition, the two main banks in BET are among the candidates to enter MSCI's emerging market indices, should our market be promoted. In the third quarter of the year, the shares of Banca Transilvania (TLV) appreciated by 20.3%, while the shares of BRD-Group Societe Generale (BRD) had an advance of 18.1%.

• Electrica and Transelectrica - the best developments in the BET-NG index

Electrica (SNP) shares rose by 16.6%, in the third quarter of the year, as the electricity supplier and distributor reported a profit of 173 million lei, between April and June, compared to of a loss in the same period last year. Transelectrica (TEL) shares appreciated by 19.4%, in the third quarter, with the company reporting, for the April-June period, a profit four times higher than that of the same period last year, the situation in the energy market being beneficial to the electricity carrier.

In a period when the price of oil had a vigorous upward trend, the shares of OMV Petrom (SNP) appreciated by 14%, a dynamic that also includes the ex-dividend correction for an allocation with a yield of about 7%. Nuclearelectrica (SNN) shares rose 9.4% in the third quarter as the company's results were in line with last year. Romgaz (SNG) shares, whose dynamics were strongly influenced by the ex-dividend correction, ended the third quarter approximately at the same level as the one at which they started. Overall, the BET-NG energy index had an advance of 11.4%, to 1,068 points, in the July-September period, in line with the dynamics of the other share baskets of the Bucharest Stock Exchange.

• FP shareholders voted to extend Franklin Templeton's directorship by just one year

The BET-FI index, of SIFs plus Fondul Proprietatea, rose by 10.6%, in the third quarter, mainly as a result of the reporting of FP securities to a reference preset by BVB for the related ex-dividend correction day the distribution of the money collected on the package held at Hidroelectrica and the increase in SIF Muntenia (SIF4) securities, by 17.4%.

Practically, in the case of FP, on the ex-dividend date (September 7) the reference was preset, so that the Price Return indices (which only include price developments, without dividends) containing securities of the investment fund did not reflect the massive correction of 81%, from reality. Without this BVB decision, the indices would have had smaller increases.

At the end of September, the SIFs were trading at discounts between the price and the Unitary Net Asset Value (VUAN) located between 65% for Lion Capital and 43% in the case of SIF Muntenia, while compared to the Unitary Net Asset reported for August, of 0.6319 lei, FP had a discount of 33%. On September 25, the Fund's shareholders voted to extend Franklin Templeton's administrator mandate by only one year, given that, according to some sources in the market, the state wants to remove the American administrator from the helm of FP.

In the third quarter, operations related to two Fidelis offers took place, through which Finances collected around 780 million euros from the population. The last one, which ended in October, accumulated subscriptions of 300 million euros, a low level compared to the usual one for Fidelis, given that the interest rates offered were lower.