DAN POPOVICI, OTP:  Bonds issuers in the region, far healthier than those in Western Europe

Bonds issuers in the region are far healthier than those in Western Europe, says Dan Popovici, investment director of OTP Asset Management. The bond funds managed by OTP have exposure to Hungary, Aus-tria, Croatia, Poland and Russia.

However, three quarters of the assets of OTP Euro Bond (ed. note: open fund denominated in Euros) are invested in Romanian bonds.

"In the event of a Greek default, Romania"s bonds denominated in lei will not be affected in any way", said Dan Popovici, yesterday, in a conference.

He said that he expects that by the end of the year or in the beginning of next year, the NBR will cut the policy rate, upon the pressure of the business environment.

As such, placements in securities could bring investors good returns over the medium-long term, the officials of OTP consider.

Lately, they have been focusing on the fixed income instruments market.

In September, OTP Bank was ranked first in terms of the volume of bond trades intermediated on the Bucharest Stock Exchange (ed. note: ranked third after the first nine months), whereas in June, OPT Asset Management converted the diversified investment fund OTP BalansisRO into a bond fund (ed. note: OTP Obligaţiuni).

Last month, OTP Bank intermediated 60 million lei in bond trades on the Bucharest Stock Exchange, and 93.7 million for the year.

• Silviu Enache: "We are discussing intermediating bond issues"

Silviu Enache, head of Capital markets at OTP Bank, says involvement of in the bond market stems from investor interest, as they are looking for alternatives, given the volatility in the stock market.

"At this time, it is absolutely necessary to take a long term approach, or else you are going to take on too much risk", he said.

This year, the average daily value of bond trades, on the BSE, fell to 1.9 million lei, as opposed to 10.8 million lei, in 2010, and 5 million lei, in 2009. This year, five new issues were listed, compared to seven last year, and sixteen in 2009.

"Unfortunately, the interest of the local public authorities for financing themselves through bonds fell significantly over the last two years, to approximately 60% of the value of the new issues recorded in 2009 (the year which saw the largest number of bond listings). Still, 2009 was an atypical year, because that was when several issues were listed, as several bridge-loan terms were entering their final stages", the representatives of OTP Bank said.

Silviu Enache also said that the bank was discussing with several potential issuers which are interested in raising funding by issuing bonds.

According to him, it takes longer to access the funding n the case of an issue of fixed income securities, it takes longer to access the funding than in the case of a bank loan.

"For companies, a bonds issue can take at most six months, and in the case of a municipality it takes about one month more needed for the approval from the Borrowing Approval Commission of the Ministry of Finance", the head of Capital markets at OTP Bank said.

There is also the risk of having the bonds issue not be subscribed, meaning that the structure of the emission is very important.

According to Mr. Enache, the maturity should be relatively low - five-ten years, the interest rate should be fixed, and the total amount should be at least three million Euros.

When deciding to buy municipal bonds, investors should consider

the municipality"s degree of indebtedness, whether it is involved in major lawsuits, and the schedule of the issue, Silviu Enache said.

• OTP Asset Management expects a 30-40% increase in assets

OTP Asset Management is betting on an 30-40% increase in assets, in 2012, compared to 208 million lei at the current time.

According to the representatives of the fund manager, in the coming period, the new products will focus on the same sector (ed. note: focused on fixed income instruments), in various forms.

The weight of fixed income instruments in the portfolios of investment funds increased to more than 60% this year, from approximately 35% in 2008, and the total assets have reached 7 billion lei, up from 0.9 billion lei, in 2008.