Succession of historical records for the BVB indices in the first three months of the year

The main indexes of the Bucharest Stock Exchange (BVB) marked a succession of historical records, the first quarter of the year, in a general climate favorable to risky assets.

The BET index, which captures the dynamics of the twenty most liquid securities of our market, appreciated by 10.8% to 17,026 points, while the BET-BK index, the performance benchmark of equity investment funds, rose by 7.9%, up to 3,116 points. Financial results for the last quarter of the year published by companies, dividend proposals, the announcement of the Revenue and Expenditure Budgets and the acquisitions of mandatory private pension funds that have more money from this year are among the domestic elements that have supported the increase in share prices since BVB.

• The S&P 500 had its best first quarter since 2019

In the United States, stock markets saw major gains in the first quarter as optimism about a "soft landing" in the economy and expectations of interest rate cuts mixed with excitement around artificial intelligence, according to Reuters.

The S&P 500 index rose 10.2%, marking the best first quarter of 2019, while the Nasdaq Composite index of companies operating in knowledge-intensive sectors rose 9.1%. The Dow Jones index rose by 5.6% in the first three months of the year.

On the other hand, in the first part of this month, inflation data came in above expectations, with the Consumer Price Index rising 3.5% in March, up from 3.2% in February. Thus, many analysts now expect the Federal Reserve to keep interest rates high for longer, and traders see the first rate cut in September more likely, according to the CME FedWatch Tool.

In Europe, where inflation reached 2.4% in March, down from 2.6% in February, the Stoxx 600 rose 7%. In Frankfurt, the DAX40 rose 10.4% in the first quarter of 2024, while London's FTSE 100 advanced 2.8%.

• Appraisals of 21% for BRD and almost 15% in the case of Transilvania Bank

At the Bucharest Stock Exchange, the BET-XT index, of the thirty most liquid securities of our market, appreciated by 9.8%, in the first three months of the year, up to 1,453 points, the share basket marking a sequence of historical highs. "The best stock developments were generally correlated with the financial results published for the last quarter of 2023," say analysts from Prime Transaction, in a report published on the company's website.

In a period in which the Euro Stoxx Bank index rose by 19%, BRD-Groupe Societe Generale shares rose by 21.1%, while Banca Transilvania securities advanced by 14.8%.

BRD reported a 33% increase in profit for the fourth quarter of 2023, there is the prospect of giving at least 50% of last year's result as dividends, and for this year it estimates a moderate increase in Net Banking Income, driven by the increase in net income from interests. Banca Transilvania reported a decrease in profit in the last quarter of 2023, but in the whole year profitability rose by 14%. The credit institution wants to give 40% of last year's result as dividends plus free shares and estimates for this year a net profit of three billion lei, 20% more than in 2023.

• OMV Petrom and Electrica - the best developments in the energy and utilities sector

In the case of energy producers, the biggest share price appreciation in the first quarter was OMV Petrom, with an advance of 17.2%. The company reported a 29% increase in profit in the last quarter of last year, proposed a dividend plus the prospect of special allocations and is forecasting a 31% higher profit this year compared to 2023. In addition, the share price benefited by the evolution of the price of oil, which rose by about 13% in the January-March period.

Hidroelectrica shares had a volatile evolution in the first quarter, marked on the one hand by the appearance of analysis reports that gave target prices below those in the market and on the other hand by profitability increasing by 35% from the fourth quarter of last year plus the intention to distribute the entire result in 2023 as dividends. Overall, in the first three months, the share price increased by 4.7%.

Romgaz shares appreciated by 12%, in the context in which the company reported a double net profit for the last months of the year, but against the background of a base effect, given by the solidarity contribution. The management of the issuer wants to distribute 20% of the profit as dividends, but also put the option of allocating 50% on the agenda.

Among utilities, the best performance was Electrica shares, which benefited from the inclusion of the shares in the FTSE Russell indices. In addition, the first information regarding the reduction of the purchase price through the Centralized Purchase Mechanism of Electric Energy (MACEE) started to appear from 450 lei/MWh to 400 lei/MWh. "This will help, on the one hand, to reduce the expenses with own technological consumption for the distribution segment, and on the other hand, to increase the profit margin on the supply segment", say those from Prime Transaction.

• Appreciation of almost 35% for Aquila; Sphera shares up 14%

Aquila shares rose by 34.8% in the first three months of the year, basically continuing the upward trend started last year. The company reported a 28% increase in profitability for the last quarter of last year, proposed a dividend, and a series of valuation reports indicating price targets above market quotes likely supported the stock's performance. The orderly uptrend suggests steady purchases of AQ shares by institutional investors.

Shares of Sphera Franchise Group rose 14% in the first quarter of the year, with the company reporting a 60% increase in profit for the final three months of 2023, capping its best year ever. Analysts estimate private consumption growth in 2024, and the company has budgeted a 20% higher profit compared to 2023.

Digi Communications shares rose 13.6% in the first three months of the year, Transport Trade Services rose 6.7% and Purcari Wineries advanced 6.4%.

• The Bucharest Court of Appeal annulled the decision of the Ministry of Transport regarding the capital increase of Bucharest Airports

The BET-FI index, of SIFs plus Fondul Proprietatea, had an increase of 2.5%, up to 60,771 points, in the first quarter of the year, the weakest evolution among BVB indices.

Franklin Templeton proposed that FP allocate a dividend with a yield of about 11%, the fund's shareholders approved the extension of the administrator's contract for a period of one year, but with the reduction of the basic commission, and rejected the request of the Finances regarding the preservation of the current patrimony of the fund. In the first quarter, the Bucharest Court of Appeal annulled the decision of the Ministry of Transport regarding the capital increase of Bucharest Airports, which would have massively reduced Fondul Proprietatea's stake in the company, from 20% to 0.7%.

Among the former SIFs, Transilvania Investments and Evergent proposed dividends and share buybacks to shareholders to reduce the share capital. The Lion Capital Group, SIF Muntenia and Infinity Capital have not proposed dividends, and the buybacks they are making are only to reward the management of the companies with free shares. However, last week shareholder Blue Capital requested that 50% of Lion Capital's profits be allocated as dividends, as well as a buyback program to reduce the share capital.

Lion Capital sold a series of holdings, including the company Azuga Turism to Electric Planners SRL, for the minimum price of 8.99 million euros. On the other hand, the former SIF Banat-Crişana was sued by the London company Lion Capital LLP for using the name Lion Capital.

At the end of the month, the SIFs traded at discounts between the price and the Net Asset Unit Value (VUAN) between 70% for Infinity Capital Investments and 51% in the case of SIF Muntenia. For FP, the discount was 21%, slightly above administrator Franklin Templeton's goal of under 15%.

The large gap between the net asset and the market price can reflect several things, including the presence in the portfolios of some holdings in unlisted companies, the absence of dividends, but first of all it reflects the lack of trust in the management of some SIFs. Symptomatic is the case of the former SIF Oltenia, whose shareholders included five Pilon II pension funds a few years ago, which held 12% of the capital. Today, the mandatory pension funds have completely left the company's shareholding, and the trading discount has reached 70%.

In the first quarter of the year, bonds of the Cluj County Council, worth 76 million euros, were listed on the Bucharest Stock Exchange. Also, the Municipality of Reşita listed the first green bonds, worth 8.8 million euros. In March, the first issue of Fidelis government securities, with a total value of 1.8 billion lei or 360.3 million euros, debuted on the BSE.