Slight declines for indices ahead of financial reporting season

The indices of the Bucharest Stock Exchange (BVB) had slight declines in October, ahead of the financial reporting season related to the third quarter, i.e. the first nine months of the year and in anticipation of the elections that are more than a few weeks away, after which fiscal measures may appear with impact on the companies' activity.

The BET index, of the twenty most liquid stocks on our exchange, was down 1% at 17,439 points, while the BET-BK index, the performance benchmark for equity funds, depreciated by 1.31 %, in October, up to 3,260 points.

Alin Brendea, the operations director of the Prime Transaction brokerage house, wrote, in one of his analysis reports published in the second part of last month: "Awaiting the financial reporting season, the general attention remains directed to the electoral area, with focus on the economic measures that the new elected officials will initiate. There is more and more information circulated in the media regarding changes in taxes in the Romanian economy that could be applied in the post-election period, starting next year. This information is currently at the probabilistic stage (it seems that we expect ...) but it has the power to develop even stronger the feeling of expectation of stock market investors".

• The European Central Bank operated the third interest rate cut this year

Major western equity markets were down slightly last month, but overall the trend remains up as the disinflationary trend looks robust, most economies are on track for soft landings and central banks are cutting benchmark interest rates.

In the United States, where the financial reporting season has begun and a good part of companies published revenues and profits above expectations, according to Factset, the S&P 500 index fell by 1%, in October, the Dow Jones had a decline of 1.3% , while the Nasdaq Composite declined 0.5% in a month in which all three baskets of stocks hit new all-time highs.

On our side of the Atlantic, where the European Central Bank cut its benchmark interest rate from 3.5% to 3.25%, the third cut by a quarter of a percentage point this year, the Stoxx 600 index depreciated by 3, 3%, while in Frankfurt, the DAX 40 fell 1.3% last month.

Read Let's win the election by tweaking the budget!

• One United, Fondul Proprietatea, Electrica and Antibiotice - among the biggest depreciations in BET

At the Bucharest Stock Exchange, in addition to the approach of the financial reporting season for the first nine months of the year, which give the first indications related to the possibilities of companies to grant dividends, and the approach of the elections, there was a new offer of Fidelis government securities, with subscriptions record, which shows that some investors prefer the safety of safe nominal interest rates that go up to 7% in the conditions of market uncertainty.

Most of the titles in BET had price drops, among the biggest being One United, Fondul Proprietatea, Electrica or Antibiotice Iaşi.

The real estate developer's shares have been in a continuous decline since the first part of the year, in terms of reporting declining financial results. Last month, One titles depreciated by 10.4%, in a context marked by the Nordis scandal, which has an impact on the entire real estate sector in our country. One United reported falling sales and rising rents for the first nine months of the year, but full results for the January-September period will be published on November 14.

The clear downtrend in the company's stock over the past two months suggests gradual selling by some institutionals.

Fondul Proprietatea shares depreciated by 10.2% last month, most likely as a result of sales by institutional investors, including Pilon II pension funds that started to reduce their holdings in FP since last year, after exiting portfolio of Hidroelectrica. The fund's shareholders were convened on December 2 to approve the delisting of the London Global Depositary Receipts (GDRs) and the redemption of up to 320 million FP shares over the next year. Early last month, the company began the process of selecting FP's administrator, which is now Franklin Templeton with a term of office until March 2026.

Electrica stocks continued their downward trend started in early autumn, with no significant news to clearly explain the recent decline. The company reported slightly increased distributed and supplied electricity volumes in the third quarter, but the full quarterly report will be published on November 15.

Antibiotics shares, which have been on a strong uptrend since the second part of last year, which propelled them into the BET index, had a 6.6% correction last month, somewhat normal in a move of sustained growth.

Shares in energy infrastructure company Premier Energy fell 5.4% last month, with no apparent reason for the decline, while shares in building materials maker TeraPlast fell 5.5%. The company announced the acquisition of 70% of Optiplast, the third largest producer of flexible packaging in Croatia, but reported a loss of seven million lei for the first nine months of the year, compared to a profit of 6.8 million lei in the January-September 2023 period, even though the turnover increased by 32%. According to the company, profitability was eroded by interest expenses, non-recurring expenses generated by geographical expansion and the impact of the start-up of the Opal stretch film business.

• Light rating for OMV Petrom; decline in the case of Hidroelectrica

In a volatile month in the oil market, OMV Petrom shares appreciated by 1.4%, the increase was manifested after the publication of financial results. The oil and gas producer reported a 54% rise in profit for the first nine months of the year due to the lack of solidarity contribution. The profit related to the period January-September 2024 amounts to 3.9 billion lei, so there are premises for the company to grant important dividends next year. Shares of Romgaz, OMV Petrom's partner in the Neptun Deep project, fell by 2.3% last month, with the natural gas producer's quotation having been in consolidation for some time.

Read October in numbers

Hidroelectrica shares depreciated by 3.2%, in a month in which the company reported a 22% drop in electricity production in the first three quarters of last year, compared to the January-September 2023 period, with Hidro due to announce the results complete for the first nine months of the year on November 14. The shares of Nuclearelectrica, the company that announced that it will sign the contract for the construction of reactors 3 and 4 at Cernavodă in the middle of this month, had an increase of 2% in October.

Transelectrica shares appreciated 8% last month, after a severe 22% decline in September, with no relevant information to justify the recent appreciation. The electricity carrier will publish its financial results for the third quarter/first nine months of the year on November 14. Also then, Transgaz will publish its results, a company whose shares rose by 3%, in a move to partially recover from previous declines.

Also on the rise, Sphera Franchise Group shares rose 2.5% last month, continuing an upward trend that began in the second half of 2023. Sphera shareholders approved a new dividend distribution and the company announced expanding the portfolio by adding the Cioccolatitaliani franchise, the franchise rights being obtained for Italy and Romania.

In a month in which the Euro Stoxx Banks index had a slight increase, the shares of Banca Transilvania appreciated by 2.2%, as the financial group will publish its financial results on November 8. BRD - Groupe Societe Generale shares fell 3.33% as the bank reported an 11% drop in profit for the first nine months of the year, the result being eroded by turnover tax and the cost the risks.

• Trading discounts between 68% for Infinity Capital Investments and Lion Capital, respectively 47% for Longshield Investment

The BET-FI index, of the former SIFs plus Fondul Proprietatea, had a decline of 0.6%, the smallest depreciation among the share baskets at the BSE. At Lion Capital, Bogdan Drăgoi, Rachid El Lakis, Marcel Heinz Pfister and Sorin Marica received new mandates as administrators, until 2029, while at Evergent Investments Horia Ciorcilă, Claudiu Doroş, Octavian Radu, Florina Cataramă and Teodor were elected -Bogdan McCann for a four-year term, also until 2029.

SIF Muntenia became Longshield Investment Group, and Infinity Capital Investments acquired, directly and indirectly, 26% of PAID SA.

At the end of the month, the SIFs traded at discounts between the price and the Net Asset Unit Value (VUAN) located between 68% for Infinity Capital Investments and Lion Capital, respectively 47% in the case of Longshield Investment. For FP, the discount was 50%, above administrator Franklin Templeton's goal of under 15%.

The last issue of Fidelis government bonds was listed on the BVB in October, with subscriptions reaching a record of over 3.5 billion lei, exceeding the August 2024 edition by over 300 million lei. The offer was divided into five tranches, three in lei and two in euro, about 55% of the subscriptions being in the European currency. For the securities in euro, the maturities were one year and five years, with interest rates of 3.95% and 5%, respectively, while for the securities in lei, the maturities were also one year and five years, with interest rates of 5 .85% and 7%, respectively 6.85% in the case of the tranche intended for blood donors.

Tomorrow the presidential elections take place in the United States, while in our country, the first round of the presidential elections will be on November 24, followed by the parliamentary elections on December 1 and the second round of the presidential elections on December 8. Very likely, the new government will be installed at Victoria Palace by the end of the year.