Increases for indices - supported by dividends, company results and pension fund purchases

The upward trend started by the indices of the Bucharest Stock Exchange (BVB) since the summer of last year continued in the second quarter of this year, with the main share baskets of our market setting new historical records, between April and June 2024.

The BET index, of the twenty most liquid securities on the BSE, had an advance of 7.2%, in the second quarter of the year, up to 18,245 points, while the BET-TR index, which also reflects the dividends granted of companies, increased by 12.5%. The BET-BK index, the yield benchmark for equity investment funds, appreciated by 8.8% between April and June this year.

These are increases that seem to be based, first of all, on internal factors, given that, with the exception of the technology sector, the main indices in the United States and Europe had much weaker developments.

Thus, the dividends granted by the main companies from the BSE, money that to a certain extent returned to the market, and the financial results related to the second quarter, which in some cases exceeded expectations, favored the increase in share prices on the stock exchange Our. Also, the acquisitions of the Pillar II pension funds, which starting in March receive contributions increased to 4.75% of the monthly gross income of employees, supported the quotations.

• Traders give 98% chance Federal Reserve will cut interest rates in September, according to CME FedWatch Tool

In the United States, the technology sector continued to be in the foreground of investors, primarily due to expectations related to the impact of artificial intelligence on productivity and innovation, a fact reflected in the dynamics of the indices. The Nasdaq Composite, of companies active in knowledge-intensive fields, had an increase of 8.3% in the second quarter, while the Dow Jones Industrial Average index depreciated by 1.7%.

Inflation eased from 3.5% in March to 3.3% in May, still above the Federal Reserve's long-term target of 2%. But data for June showed inflation at 3%, massively raising expectations for a rate cut at the September meeting. Late last week, futures traders were giving a 98 percent chance the Fed would cut rates two months from now, according to the CME FedWatch Tool.

On our side of the Atlantic, the European Central Bank has already reduced, in June, the benchmark interest rate, but the indices mostly fell, given that the technology sector is much less represented than in the United States. The pan-European Stoxx 600 lost 0.2%, while Frankfurt's DAX fell 1.4%. The CAC 40 index in Paris had a decline of 8.8%, given that the country is in a real political deadlock, with a Parliament without a majority.

• MedLife, Transelectrica and Sphera Franchise Group - among the best developments among the main companies on the BSE

At the Bucharest Stock Exchange, the extended BET-XT index, which captures the evolution of the thirty most liquid shares of our market, had an advance of almost 7.1%, in the second quarter of the year, while all with dividends the increase was around 12%, reflected by the evolution of the BET-XT-TR index. Shares of private healthcare provider MedLife appreciated 54.01% in the second quarter of the year, the best performance in BET and second in BET-XT, after Antibiotics.

The uptick has been taking shape since mid-May, when the company announced a return to profitability, growing business and margins, suggesting investors are betting that MedLife's results have reached an inflection point. Moreover, for this year, the company budgeted an increase in turnover and a net profit of 21.8 million lei, compared to a loss of almost 4.2 million lei last year. High volumes in some trading sessions point to purchases by major institutional investors, such as Pillar II pension funds.

Shares of the electricity carrier Transelectrica had a total return of 49.6% on the back of the increase in the quotation, which began its appreciation after the company announced a 29% increase in profitability in the first quarter of the year. According to a report by the Prime Transaction brokerage company, Transelectrica's prospects are favorable, considering the increasing regulated tariffs and the lower costs of its own technological consumption. The company also still has cash to recoup after high electricity prices have driven up the costs of own technology consumption in past years.

Shares of Sphera Franchise Group, operator of public catering chains, had a total return of 32.6% in the second quarter, primarily coming from the appreciation of the quotation. For the first three months of the year, the company reported a triple profit compared to the January-March 2023 period, it expects profitability to increase by 20% this year, and the company's management announced the intention to propose another dividend.

In terms of appreciation, Digi Communications stocks are also noteworthy, which rose by 34%, in the second quarter, against the background of a number of factors, among which the sale by Digi Spain of an optical fiber internet network for a price of up to 750 million euros, the inclusion by Morgan Stanley of the company's shares in indices dedicated to frontier markets and the preparation for the launch of the telecommunications operator's services in Belgium.

• Different developments for banking stocks in BET

The two banks in the BET index had different developments in the second quarter of the year, during which the Euro Stoxx Banks index had a slight decrease of 2%. Banca Transilvania shares appreciated by 14.9%, and including dividends the total yield was 19.44%, while BRD securities depreciated by 3.7%, with a slightly positive yield taking into account and the dividend.

One of the reasons that can explain the difference in performance relates to the results reported by the two credit institutions, for the first three months of the year, namely the increase in profitability by 35% for Banca Transilania and a decrease of about 5% in the profit in the case of BRD.

In addition, Societe Generale is in the process of selling some divisions of the institution. BRD Pensii, manager of Pillar II and Pillar III funds, is to be acquired by Banca Transilvania itself, while the Otto Group takes over a portfolio of performing and non-performing loans from BRD Finance IFN. According to some news that appeared in the press in February, the French are even exploring the possibility of selling BRD, information that has not been confirmed but not denied by the management of the credit institution.

• Prospects for higher dividends at OMV Petrom; Hidroelectrica, Nuclearelectrica and Romgaz revised down their Income and Expenditure Budgets for this year

OMV Petrom shares increased by 13.6% in the second quarter of the year, and including dividends the total yield rose to 19.7%, at a time when the price of oil internationally had a slight decrease.

The company proposed a new dividend to shareholders and updated the policy regarding possible future distributions, namely an allocation of around 50% of cash flows from operating activities each year until 2030, compared to 40% until recently.

Hidroelectrica shares fell by 6.9% in the second quarter of the year, due to the ex-dividend correction, and a total return of 3.5%. The company reported lower revenue and profit for the first three months of the year and revised down its Income and Expense Budget, implying lower dividends, amid lower electricity prices. A similar situation (decrease in profitability, BVC rectified downwards) is also at Nuclearelectrica, whose shares depreciated by 7.3%, in the first quarter, following the ex-dividend correction.

Romgaz, which also lowered its BVC for this year, operated a capital increase with the allocation of free shares, with each shareholder receiving nine new titles to one owned. The company reported a 28% rise in profit in the second quarter, but the dividend payout is only 20% of last year's result, as requested by the company's management.

Transgaz shares appreciated by 22%, in the second quarter, as the company doubled its profitability in the first quarter of the year, a significant impact on the results due to the increase in regulated transport tariffs.

Overall, the BET-NG index of energy and utilities companies advanced 5.8% in the April-June 2024 period.

• Trading discounts between 74% for Infinity Capital Investments and 54% in the case of the former SIF Muntenia

The BET-FI index, of the former SIFs plus Fondul Proprietatea, had a decline of 3.3%, up to 58,767 points, following the drop in the price of FP shares by 24%, which also includes the ex-dividend correction.

Fondul Proprietatea lost its importance after the sale of Hidroelectrica, being dependent on the will of the state for the capitalization of other holdings in the portfolio. Under these conditions, Pillar II funds sell from holdings in FP.

At the end of the month, the SIFs traded at discounts between the price and the Net Asset Unit Value (VUAN) between 74% for Infinity Capital Investments and 54% in the case of Longshield Investment Group (formerly SIF Muntenia). For FP, the discount was 40%, above administrator Franklin Templeton's goal of under 15%.

• Fort and Glissando Garden Center debuted in AeRO Square

The Ministry of Finance made two issues of Fidelis government bonds in the second quarter of the year. One took place in April, the amount collected from the population being about 3.2 billion lei, and another in June, the value of the subscriptions in this case being almost 2.2 billion lei. Both shows are listed on the BVB.

The energy company Premier Energy was listed on the Regulated Market, following an initial public offering that attracted 695 million lei - the largest IPO of a private company in the last five years.

InterCapital Asset Management has listed the first ETF (Exchange Traded Fund) from the Bucharest Stock Exchange that tracks the performance of the BET-TRN index, the total net return variant of the BET index, which reflects both the price evolution of the most important Romanian companies listed on the stock exchange together with the reinvestment of the net dividends offered by them.

The cyber security company Fort, part of the Bittnet Group, was listed on the AeRO Market, following a capital increase and a private placement, as a result of which the company attracted 1.67 million lei. Also, Glissando Garden Center, a company specialized in the trade of flowers, plants, gardening articles and plant protection products, made its debut on the stock exchange, following a technical listing.

JT Grup Oil, a company active in the fuel distribution market, carried out an IPO through which it attracted 20 million lei from investors, about a third of the total offer, the company's shares will be traded on the AeRO Market.