Dan Dascăl, CEO of BT Asset Management: "We expect the local market to bring returns above what we see on the main exchanges"

Reporter: Barring completely unforeseen events, what are your expectations for the returns of equity and bond funds this year? On what grounds do you base your opinions?

Dan Dascăcal: We expect 2024 to be a good year for the financial markets, although volatility may be a more frequent element in the overall development, especially in the stock exchanges.

The main theme, globally, we believe will be the moves central banks will make, following the largest cycle of key interest rate hikes in 50 years. The fact that inflation is on a fairly strong downward trend and, at least in the United States and the European Union, the pace of price increases is approaching central bank targets, leads us to believe that the rate hike cycle we have seen in the last two years is over. Thus, bond markets can perform, given that we have estimates for a potential start of monetary easing in developed economies, starting in the second part of 2024.

Also, it will be very important to see if the United States economy will succeed in that "soft-landing", easy landing, which has been talked about for the last year, because this seems to be a topic with a major impact, on which the performance will depend markets in 2024. Such a scenario would lead to a positive evolution on the stock market, because it would mean a confirmation of the fact that the world's largest economy has brilliantly resisted a period of high interest rates, avoiding a recession predicted by many analysts.

However, we must take into account the fact that, in the past, the effect of interest rate increases was felt in the economy with a delay of one or two years, so it is not excluded that in 2024 we will see some turbulence from the re-financing segment of corporate debt. That is why, although the general sentiment is optimistic, we maintain a dose of moderation in the expectations regarding the evolution of the markets and the economy for the year 2024.

Reporter: Reporter: Do you think there will be a significant difference between the evolution of BSE shares and international ones - European and/or from the United States? Why?

Dan Dascăl: Companies on the Bucharest Stock Exchange are recognized for a stable and generous dividend policy, with many local issuers offering high yield dividends of over 7%, which is very attractive compared to what we see with large companies on international stock exchanges , where the average dividend yield does not exceed 3-4%. We expect this positive differentiator for the BSE to contribute to a good performance of local stocks in 2024 as well, even if dividend estimates are slightly down, if we refer to the amounts distributed in 2023.

On the other hand, we are in a context of high interest rates, and the fact that the level of debt of BSE companies is quite low, compared to what we see on the stock exchanges in the region, can help the local market, taking into account that high interest rates have not significantly affected local issuers' profit margins. Also, on the BSE there is quite a large discrepancy between the demand and the supply of shares, namely the fact that a good part of the demand comes consistently, on a monthly basis, from pension funds, which are the biggest player on the BSE. The supply of shares (the free-float) is quite limited, and this imbalance can help local share prices. Of course, we have to carefully follow the evolution of the markets at the macro level, because the stock markets are highly correlated, and any important movement from outside can also influence the general direction of the Bucharest stock market.

Thus, in the absence of major unforeseen external shocks, we expect the local market to continue its positive evolution, and to bring returns above what we see on the main stock exchanges.

Reporter: The number of investors in open funds in Romania increased last year, both in the case of stocks and diversified funds as well as in the case of bonds, according to the data of the Association of Fund Administrators. What do you think are the explanations for this development?

Dan Dascăl: We notice that financial education is growing in Romania, especially among younger investors, and we see more and more people forming a long-term investment plan, and in that plan an important focus is placed on investing in mutual funds or even directly into actions.

It is gratifying that, in contrast to the behavior of a few years ago, when a potential investor would wait to set aside a certain more substantial amount, only to then enter the market with that amount, now, thanks to the emergence of recurring investment services, we see investors which come in smaller amounts, but in a constant, monthly manner, so that over time, significant capital accumulates in the investment account. Currently, almost 50% of our clients have an active recurring investment plan, called Direct Invest.

Exposure to the financial markets through an investment fund is much more accessible to an investor who does not have the time necessary to study the evolution of the stock markets day by day and may not necessarily have advanced knowledge for a thorough investment analysis. Thus, mutual funds are a very affordable and easy-to-use tool to invest in the financial markets.

Also, in the context of high inflation in recent years, many investors have turned to those investments with the potential to beat inflation, and the performance of the local stock exchange over the course of 2023 has attracted more and more investors. Many people have begun to realize that if they keep their money only in bank deposits or in a checking account, there is a fairly high probability that, in the long term, inflation will erode the value of the amount saved, so that the orientation towards stocks or mutual funds shares comes naturally because these tools, statistically, have brought the best long-term returns.

Let's not forget the role of the Hidroelectrica IPO, which, in our opinion, is the most important event in recent years at BVB, an event that attracted to the market, in addition to institutional investors from outside, also many local retail investors, who , until this listing had no connection with the local capital market. The entities involved in the Hidro IPO did an excellent job in terms of promoting this event, which brought major benefits to both the Bucharest Stock Exchange and the entire financial market ecosystem in Romania.

The number of clients within the funds managed by BT Asset Management was positively influenced by these premises, registering an increase of approximately 45% during 2023. We are happy that we have made available to our clients attractive products alongside an investment service recurring customers and we are honored that they have chosen our services.

Reporter: Thank you!