Sequence of new all-time records for the main indices of BVB

The main indices of the Bucharest Stock Exchange (BVB) marked a succession of new historical records in the first half of the year, in a general international context conducive to risky assets, boosted by internal elements such as the financial results and dividends paid by many companies, constant acquisitions of pension funds and lower supply of shares compared to growing demand.

It is a continuation of the upward trend that has been registered since the summer of last year, together with the Hidroelectrica offer, which brought new money and investors to our capital market, their number reaching almost 200,000 in the first quarter of the year, of 141,000 in March 2023 and 88,000 two years ago, according to data from the Investor Compensation Fund.

In addition, the stability of the exchange rate contributes to the attractiveness of our capital market for foreign investors.

In this context, the BET-XT index, of the thirty most liquid securities from BVB, had an advance of 17.5%, in the first half of the year, and including dividends, the yield of the extended index amounted to 23.5 %, a fact reflected by the evolution of the BET-XT-TR index. The BET-BK index, the performance benchmark for equity investment funds, rose 17.4% in the first six months of this year.

• S&P 500 up 14.5%, while Stoxx 600 gains 6.8%

In Western equity markets, the combination of disinflation, the prospect of interest rate cuts and the resilience of economies supported quotes, while expectations about the impact of artificial intelligence on productivity and innovation took the US stock market to new heights.

The Federal Reserve has yet to start cutting interest rates, but markets are giving a 100 percent chance of a first cut in September, according to the CME FedWatch Tool. In the first six months of the year, the S&P 500 rose 14.5%, while the Dow Jones Industrial Average gained 3.8%. The Nasdaq Composite index, of companies active in knowledge-intensive fields, appreciated by 18.3%.

On our side of the Atlantic, where the European Central Bank has already operated the first interest rate cut but the technology sector is much less represented than in the United States, the indices had smaller increases. Thus, the Stoxx 600 appreciated by 6.8%, while in Frankfurt the DAX40 index had an advance of 8.9%, in the first six months of the year.

• Financial results, dividends and BVCs

At the Bucharest Stock Exchange, in the first six months of the year, companies announced two sets of financial results (for the fourth quarter of 2023 and the first quarter of 2024), proposed and distributed a good part of the dividends from last year's results - with a average return of 8% for broadcasters in BET, and announced the Revenue and Expenditure Budgets for this year.

In addition, the Pillar II funds began to receive, from March, monthly transfers increased to 4.75% of the gross income of the employees, part of the money being invested in shares from BVB. In this context, the BET index, which captures the dynamics of the twenty most liquid securities of our market, had an advance of 18.7%, in the first six months of the year, while, including dividends, the return of the share basket raised to 25.2%.

• Digi, Sphera and MedLife - the best developments in BET

Digi Communications and Sphera Franchise Groupe stocks have returned more than 50% in the first six months of the year, almost entirely from stock appreciation, followed in the top three BET gains by MedLife shares, up 49.7%.

The telecommunications operator benefited from a combination of factors, including Digi Spain's sale of a fiber optic internet network for up to 750 million euros, Morgan Stanley's inclusion of shares in frontier market indices and preparation for the launch of the company's services in Belgium. The operator of public food chains Sphera reported strong profitability estimates, even a doubling in the first quarter of the year, and analysts estimate the increase in private consumption, which would be beneficial for the company.

For the privately held healthcare provider, price appreciation has been evident since mid-May, when the company reported a return to profit, growing business and margins, suggesting investors are betting that MedLife's results have reached an inflection point . Moreover, for this year, the company has budgeted a net profit of 21.8 million lei, compared to a loss last year.

In terms of appreciation, the shares of the distribution and logistics company Aquila stand out, which had a total return of 39.8%, of which 32% represents the increase in the quotation. The evolution was manifested in the first quarter, including against the background of some evaluation reports that indicated target prices above market quotations.

• Over 25% returns on banking stocks

In a period in which the Euro Stoxx Banks index had an increase of almost 15%, the two banks in BET had consistent total returns, in terms of overall reporting (fourth quarter 2023 and first quarter 2024) of financial results in growth and dividend distributions. In addition, high interest rates provide a high source of profit for credit institutions.

In the first six months of the year, Banca Transilvania shares had a total yield of 37.8%, almost 32% coming from the appreciation of the quotation, while the yield of BRD securities amounted to 28.3%, of which 16.6% derived from the evolution of the quotation.

• Strong growth for OMV Petrom and utilities

The BET-NG index of energy and utilities companies rose 15.8% in the first half of the year, primarily due to the performance of oil and gas producers and utilities stocks.

In a period when the price of crude oil increased by around 10%, OMV Petrom shares had a total return of 40.3%, of which 33% came from the evolution of the company's quotation. The evolution is based on a combination of factors including the granting of dividends, including the prospect of a special distribution, the budgeting for this year of a profit 31% above that of the previous year and, probably, entering the period with the largest investments in the history of the company, which also includes the Neptun Deep project.

Transelectrica securities had a total return of 40.1% in the first six months of the year, while the return of Electrica shares was 36.6%. Also, Transgaz securities had a yield of 27.5%. All three companies reported significant increases in profitability in the first three months of the year (in the case of Electrica, it is about the transition from loss to profit) and their revenues come, to a large extent, from tariffs regulated by ANRE, which are increasing.

Hidroelectrica's shares had a volatile evolution in the first six months of the year, during which the company reported declining results for the first quarter and revised down its Revenue Budget for this year, but awarded almost all the profit as dividends. Under these conditions, Hidro shares had a 2.6% decrease in the January-June 2024 period, but a total return of 8.3% due to the distribution of dividends. A similar situation (decrease in profitability, BVC rectified downwards) is also at Nuclearelectrica, whose shares depreciated by 6.9% in the first semester, a decrease compensated by the dividend.

• 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 0.9%, being the only share basket from BVB that depreciated in the first half of the year.

It is a decrease caused by the dynamics of FP shares, which lost their importance after the sale of the 20% stake in Hidroelectrica, so that pension funds reduce their holdings in the company. In addition, the Ministry of Finance has begun to pressure the fund to preserve its portfolio, making it more difficult to capitalize on the listing of FP's most important holdings.

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%.

• Premier Energy has listed on the BSE, following the biggest IPO of a private company in five years

The Ministry of Finance made three issues of Fidelis government bonds, denominated in lei and euro, in the first half of the year. Through the first, held in March, Finances collected 1.8 billion lei from the population, the subscriptions of the next two offers, from April and June, being 3.2 billion lei and almost 2.2 billion lei. All three 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.

Cluj County Council bonds, worth 76 million euros, were listed on the BVB in the first half of the year. Also, the Municipality of Reşita listed the first green bonds, worth 8.8 million euros.

InterCapital Asset Management has listed the first ETF (Exchange Traded Fund) from our stock exchange, which 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 BVB together with the reinvestment 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.

At the end of this month and during next month, BVB companies will announce their results obtained in the second quarter of the year, an element that can have an impact on the upward trend of our market indices. Today, OMV Petrom and TeraPlast are among the most important names that will present themselves to investors with the performance achieved so far this year, with BRD coming out tomorrow.

For now, at the macro level, the BNR has started the reduction of the monetary policy interest rate, it is forecasting a more pronounced drop in inflation than in the spring, and economic growth is expected to accelerate, a climate that, in theory, is beneficial to stocks.