FINANCIAL NOVEMBER Increases on the BSE, in an international climate favorable to equity markets

The indexes of the Bucharest Stock Exchange (BVB) increased in the penultimate month of the year, in an international climate favorable to the stock markets. The BET index, of the twenty most liquid titles of our stock market, rose by 3.5% to 14,712 points in November, a movement that continued in the first days of December, when the basket of shares reached a new all-time high. The BET-BK index, the yield benchmark of investment funds in shares, appreciated by 3.2%, up to 2,757 points, while the BETAeRO index, of companies considered relevant to the Multilateral Trading System of BVB, increased by 4.9%, at 945 points.

The month was marked by companies publishing results for the third quarter, i.e. the first nine months of the year, which give investors a picture of the profits that the issuers could achieve in 2023 and the possibilities of dividend allocation.

• The prospect of an end to the Fed's rate hike cycle fueled the rally in US indices

In the United States, the Federal Reserve kept its key interest rate in the range of 5.25-5.5%, and the latest inflation data showing a deceleration to 3.2% in October from 3.7% in September, below analyst estimates of 3.3%, bolstered markets' belief that the Fed has ended the current rate-hiking cycle. Additionally, most companies reported earnings above estimates for the third quarter, according to Yahoo Finance.

Under these conditions, the S&P 500 rose 8.9% last month, while the Dow Jones Industrial Average rose 8.8%. The Nasdaq Composite, of companies operating in knowledge-intensive fields, rose by 10.7% in November.

In a speech in early December, Fed Chairman Jerome Powell suggested that rate hikes may be over if inflation and the economy continue to decelerate as expected. But Powell stressed that the Federal Reserve can still raise interest rates if necessary.

On our side of the Atlantic, where European Central Bank President Christine Lagarde pointed out that activity in the eurozone has stagnated in recent quarters and is likely to remain weak for the rest of the year, but that inflationary pressures are expected to continue to ease, the index The Stoxx 600 rose 6.4% last month. The DAX40 index, of the Frankfurt stock exchange, appreciated by 9.5% in November, and in London, a market less correlated with developments on the continent, the FTSE 100 rose by only 1.8%.

• Appreciation of 3.3% for the BET-XT index, of the thirty most traded shares on the BVB

At the Bucharest Stock Exchange, the BET-XT index, of the thirty most liquid securities of our market, had an advance of 3.3%, up to 1,268 points, while the BETAeRO index, of companies considered relevant to the System Multilateral Trading of BVB, rose by 4.9%, to 945 points.

Hidroelectrica (H2O) shares appreciated by 10.3% last month, reaching a new record of 128.7 lei, almost 24% above the price at which the public offer ended in the summer, of 104 lei. The prospects are that the energy producer will be given substantial dividends next year, given that, for the first nine months, the company reported a net profit of almost 5.2 billion lei, 42% above that of the same period last year and above the budgeted level for 2023, of 3.6 billion lei.

Hidroelectrica is majority owned by the state and even before the listing announced that it wants to maintain a dividend distribution rate of at least 90% of the profit. At the end of November, the company's capitalization was 57.9 billion lei, so based on nine-month profit alone, the gross dividend yield would be 8%, according to our calculations. Therefore, it is plausible that, in the spring, Hidroelectrica will come up with an allocation proposal with a yield of around 10-11%, from the result of 2023.

In the last trading session of last month, H2O shares rose by 4.63%, amid a turnover of 115 million lei, huge by the standards of our stock exchange, with massive buy orders towards the end of the day - typical action for institutional investors.

• Transport Trade Services and Purcari - among the most important increases in the BET index

Transport Trade Serivices (TTS) shares continued their upward trend this year, rising 14.2% last month to a new all-time high of 24.9 lei. The company, which benefits from the context created by the conflict in Ukraine, reported for the first nine months of the year revenues increasing by 31% and a net profit of 136.5 million lei, 83% above that of the January-September 2022 period.

The port operating business has overtaken river transport as a share within TTS and is likely to have percentage increases above the group average, given that TTS has recently expanded into this area by purchasing Decirom, as shown in -an analysis report of Prime Transaction.

"The TTM net profit (n.r. of the last twelve months) has risen to almost 300 million lei, 4.4 times higher than the one recorded in 2021, and at the end of the year it may reach even above this threshold. More importantly, it is a profit that requires cash inflows, and in the short and medium term no major change in the context that led to its accelerated growth is foreseen", the report also points out.

Shares of wine producer Purcari Wineries (WINE) rose 9.5% to 13.66 lei after the company reported a 26% rise in revenue for the first nine months of the year and a net profit of 35, 4 million lei, up 24%.

"The TTM net profit of the group reached 65.6 million lei, and if it remains there at the end of the year, it will set a record for the period after 2017, for which we have available data", according to those from Prime Transaction.

• Romgaz aims to be included in the emerging market indices of FTSE Russell

In a month in which oil prices fell slightly, shares of OMV Petrom (SNP) moved sideways, ending the November 29 session at 0.541 lei, 0.9% above the end of October's close. The company reported results down from last year's exceptional results, but has a committed dividend policy, pledging to increase its basic allocation per share by an average of 5-10% per year.

Romgaz (SNG) shares appreciated by 5.4%, last month, to 48 lei, as the company wants to achieve a capital increase of almost 3.5 billion lei, by incorporating some reserves , each shareholder to receive nine free shares for one held. According to the company, one of the main purposes of the market operation is to increase the liquidity of SNG shares and inclusion in the emerging market indices of FTSE Russell.

Nuclearelectrica (SNN) shares rose by 4.5% last month, up to 47.55 lei, without obvious fundamental reasons. Utilities had lower quote variances.

• Growth below the European average for banking stocks

In a month in which the Euro Stoxx Banks index appreciated by 8%, BVB banks had smaller increases. The securities of Banca Transilvania (TLV) appreciated by 3.2%, to 22.98 lei, in a month in which the credit institution reported, for the first three quarters of the year, a net profit increasing by 36.5 %, but at quarterly level the growth dynamics moderated.

Shares of BRD-Groupe Societe Generale (BRD) ended November at the price of 16.6 lei, only 1.7% above the closing in October, amid the decline in the second part of the month, after BRD's quotation had initially increased fueled by the proposal of dividend. The bank wants to allocate 0.9226 lei per share, equivalent to a gross yield of about 5.5%, compared to the last price of the share in November.

• 11% decline for BVB titles, the biggest in BET

Bucharest Stock Exchange shares fell by 11%, last month, to 62.6 lei, the biggest decline in the BET index. The depreciation comes after strong growth over the past year, fueled by the prospect of Hidroelectrica's listing and elections for a new Board of Directors.

Radu Hanga won a new mandate as president of our capital market operator, with over 90% of the votes cast. Cristian Pascu, Daniela Secară, Şerban Marin, Loredana Chitu and Remus Vulpescu are the new names on the BVB Council, whose mandate will begin in January-February next year.

The stock exchange reported, for the first nine months, a double profit compared to the same period last year, and for the third quarter the net result amounted to 18.1 million lei, compared to only 1.9 million lei in the third quarter of 2022, based on the effects of the Hidroelectrica listing.

Among the declines, MedLife (M) shares were also noted, which depreciated by 9.81%, to 4.09 lei, as the company reported a net loss for the third quarter and a decline in profitability of 93% in the first nine months of the year.

• 67% trading discounts for Lion Capital and Infinity Capital Investments; SIF Muntenia had a 46% discount at the end of November

The BET-FI index, of SIFs plus Fondul Proprietatea, rose by 3.8% last month, to 57,917 points, an evolution in line with that of the other BVB indices.

FP shares increased by 4.1%, to 0.51 lei, as the Fund increased the size of the public offer it is running to about 30% of the capital, the price of the market operation being 0.6319 lei, by 24% above that of FP titles since the end of November.

Infinity Capital Investments (formerly SIF Oltenia) became the majority shareholder of Electromagnetica, following a public offer that was challenged in court by Unirea Shopping Center. SIF Muntenia concluded a cooperation agreement with Sea Container Services for the launch of a public offer to take over the company Şantierul Naval Orşova, under the conditions that both companies each own more than 33% of the producer of river vessels.

At the end of the month, the SIFs traded at discounts between the price and the Net Asset Unit Value (NAV) between 67% for Lion Capital and Infinity Capital Investments, while the SIF Muntenia securities had a relative difference to the asset level of 46%. In the case of FP, the discount was 21%, slightly above the objective of administrator Franklin Templeton, below 15%.

On November 27, the Ministry of Finance launched a new offer of Fidelis government bonds intended for the population, consisting of five issues, in euros and lei. Those in lei have interests of 6.1% for securities with a maturity of one year and 7.1% in the case of those intended for blood donors, respectively 7.25% for those with a maturity of three years. In the case of those in euros, the interest is 4% for securities with a maturity of one year, respectively 5.5% in the case of those with a maturity of five years. The subscription period will end on December 15, with the securities to be listed on the Bucharest Stock Exchange.