Political developments brought volatility to the BVB in December

Political events brought volatility to the Bucharest Stock Exchange (BVB) in December, with our capital market indices nevertheless ending the last month of the year in positive territory.

The BET index, of the twenty most liquid stocks on the BVB, advanced 2.3%, to 16,721 points, while the BET-BK index, the benchmark for the performance of equity investment funds, appreciated by 4.1%, to 3,139 points. The developments were influenced, first of all, by the Constitutional Court's annulment of the first round of the presidential elections won by the far-right populist candidate Călin Georgescu, whose pro-Russian speech raised concerns among investors regarding our country's European and North Atlantic perspective. The Court's decision came following the declassification of intelligence documents, according to which external state and non-state actors were involved in Georgescu's electoral campaign and there were undeclared sources of funding.

• Wall Street did not have the traditional "Santa Claus rally"

The traditional December stock market rally in the United States, called the "Santa Claus rally", did not take place last year, in a month in which the Federal Reserve cut interest rates by 25 basis points, but announced that it would be cautious about further rate cuts.

This in the context in which inflation is still above target and economic growth is solid, conditions that, normally, do not require monetary policy easing, according to CNBC. The Nasdaq Composite index, an index of companies operating in knowledge-intensive sectors, increased by 0.5% in December, while the Dow Jones Industrial Average depreciated by 5.3%. The S&P 500 index fell by 2.5% last month, but ended 2024 with a spectacular increase of 26%.

On our side of the Atlantic, where the European Central Bank also cut interest rates by 25 basis points and lowered its inflation forecast for this year, the Stoxx 600 index fell 1.1%. In Frankfurt, the DAX index rose 1.4%, while in London, the FTSE 100 fell 1.4% in December last year.

• The cancellation of the first round of the presidential elections brought the biggest increase in the BET index in almost two years

On the Bucharest Stock Exchange, the announcement of the cancellation of the first round of the presidential elections, on December 6, brought a 2.97% increase in the BET index that day, the biggest appreciation of the basket of shares in the last almost two years, reflecting the elimination by investors for the time being of the most negative scenarios regarding the politics and implicitly the economy of our country. Shortly afterwards, Fitch revised Romania's outlook to negative, among the reasons cited by the rating agency being the political uncertainty that will probably have a significant negative effect on fiscal consolidation, a budget deficit of 8.2% for last year, above the previous estimate, and low economic growth.

At the very end of the year, the new Government adopted the so-called "austerity ordinance", which includes, among other things, the increase in the dividend tax from 8% to 10%, the elimination of tax exemptions for employees in IT, construction and agriculture, as well as the reintroduction of the tax on special constructions, measures for which implementation norms are to be developed. In all this political turmoil, our country's entry into the Schengen area, starting this year, had rather limited echoes.

• TTS, TeraPlast and Sphera - the best developments in BET

The shares of the Danube freight carrier Transport Trade Services, those of the construction materials manufacturer TeraPlast and the shares of Sphera Franchise Group, a company that operates public catering chains, had the best price developments in the BET index, in December of last year.

TTS shares were coming off a sharp drop of about 50% in 2024, so the increase in December, of 11.9%, may have been catalyzed by the purchases of some investors who found the reduced price at which the issuer's shares had reached attractive, given that Romania's entry into Schengen has not had a major impact on it. Transport Trade Services' results have improved strongly in recent years following the outbreak of the conflict in Ukraine, but now the activity is returning to near pre-war levels, so that the issuer is experiencing a negative base effect.

TeraPlast shares have also seen a massive decline since the beginning of the year, with losses recorded. In December, the share price appreciated by 10.8%, without any major news to influence the price evolution. In the case of Sphera shares, a company that brings together the KFC, Pizza Hut and Taco Bell brands under its umbrella, the shares increased by 8.3% in December, the company coming after an excellent year from a financial point of view, with generous dividend distributions and acquisitions of Pilon II funds. In addition, the issuer is running a share buyback program, an operation that supports the price of the shares in the market.

• Power and utilities up; Fitch revises Nuclearelectrica and Romgaz rating outlook to "negative'

The BET-NG index of power and utilities companies rose 2% in December. Hidroelectrica shares rose 2.2%, with the power producer and supplier a typical defensive company, with large dividend payouts and consolidated shareholder base. Nuclearelectrica shares rose 3.6% in a month in which the company's management signed the 1.9 billion euro contract for the refurbishment of Cernavoda reactor 1, and Fitch revised the issuer's rating outlook from "stable' to "negative'.

OMV Petrom shares fell slightly, by 0.6%, while Romgaz shares, the oil producer's partner in the Neptun Deep project, rose 2.9%. Fitch also revised the outlook on Romgaz's rating to "negative" last month, during which the company contracted a 100 million euro credit facility. Also in December, Romgaz completed the delisting of its GDRs from the London Stock Exchange.

In the utilities sector, shares of Electrica, which deals with the supply and distribution of electricity, rose by 7% last month, while shares of Transelectrica, which deals with energy transport, appreciated by 1.7%. Shares of natural gas transporter Transgaz, a company whose results have a cyclical evolution, with the fourth quarter being, in general, very good, appreciated by 6.3% last month.

• Slight appreciation for banks; decline for Aquila shares

Banking shares appreciated slightly, in a month in which the Euro Stoxx Banks index increased by about 5%. Banca Transilvania shares, which are in the process of integrating OTP Bank Romania, appreciated by 2.3% in December last year, while BRD shares advanced by 3.7%.

In terms of declines in the BET index, in addition to OMV Petrom, the decline in shares of the distribution and logistics company for offshore goods Aquila, which depreciated by 2.1%, is noteworthy. The "austerity ordinance" provides for the freezing of pension and salary increases for public sector employees, which may have a negative impact on consumption and, implicitly, on Aquila's activities.

CCP.RO Bucharest announced last month that it is resuming the Central Counterparty authorization process, given that the EMIR 3 regulation, which regulates the authorization and operation of CCPs in the European Union, entered into force on December 24, 2024. According to CCP.RO President Adrian Tănase, the measure is intended to ensure the predictability necessary for the Central Counterparty to be operationalized according to the business plan approved by the CCP shareholders in September of last year.

• Trading discounts between 68% for Infinity Capital Investments and Lion Capital, respectively 42% in the case of Longshield Investment

The BET-FI index, of former SIFs plus Fondul Proprietatea, had an advance of 4.19%, last month, the largest appreciation among the price return indices (which do not reflect dividends) on the BVB.

Shares of FP, the issuer in which private pension funds liquidate their holdings, appreciated by 2.6%, in December, the month in which shareholders approved and the fund started the delisting of GDRs from the London Stock Exchange. The issuer is currently carrying out a process of selecting a new administrator, given that Franklin Templeton has decided not to run for a new mandate at the helm of FP.

Longshield Investments shares appreciated by 12.5% in December, the month in which the fund launched an offer to buy back 18 million of its own shares, at a price of 1.95 lei per share, above the market price at the time of the operation's approval by the ASF, of 1.72 lei.

At the end of December, SIFs were trading at discounts between price and Net Asset Value (NAV) of between 68% for Infinity Capital Investments and Lion Capital, and 42% for Longshield Investment. For FP, the discount was 52%, above the administrator Franklin Templeton's objective of under 15%.

• Green Tech International to List on BVB

The Ministry of Finance raised 2.6 billion lei or 523.1 million euros through the latest Fidelis government bond offering last year. The offering was structured into six tranches, four in lei and two in euros, with interest rates ranging from 7.9% to 6.45% for the tranches in the national currency, and 3.75% to 5.75% for those in the European currency.

At the end of last year, the offering of Green Tech International, a group that provides green heat to various types of clients, was carried out, an operation in which, out of a total of two million offered securities, 534,422 shares were subscribed, of which 25,500 were allocated to the institutional investors tranche and 508,922 to retail investors. The final price of the offer was 15 lei per share, with the company set to be listed on the Bucharest Stock Exchange.

• Banca Transilvania, OMV Petrom and Hidroelectrica share exchanges - on the top three in turnover

Last month, the total value of transactions with securities listed on the BVB Main Segment was 4.13 billion lei, 52.7% more than that recorded in November, the increase being given by the latest issue of Fidelis government securities.

The average daily value of transfers rose by 78.2%, to 229.3 million lei, for the same reporting period, an advance also influenced by Fidelis, as shown in the BVB Monthly Bulletin.

With transactions worth 322.7 million lei, Banca Transilvania shares occupy the first position in the top turnover of December, on the second position of the podium being OMV Petrom shares, which accumulated transfers of 168.9 million lei. The top is completed by the exchanges of Hidroelectrica shares, which amounted to about 116.2 million lei.

At the end of last year, the market value of all companies listed on the Main Segment of our capital market (including Erste Group Bank) was about 350.3 billion lei, up 5.3% compared to the one recorded at the end of November, according to the BVB monthly report.

Read The month of political aberrations