The BSE's upward trend stalled

The upward trend of the indices of the Bucharest Stock Exchange (BVB), which started in the middle of last year, stalled in the third quarter, in contrast to the evolution of most western markets, which points to internal causes for the weak dynamics of our stock market. The BET index, of the twenty most liquid stocks on the BSE, fell 3.4% in the July-September period, while the BET-BK index, the performance benchmark for equity investment funds, fell by almost 2.6%.

• Traders are betting on another rate cut by the Fed in November

In the United States, after a severe shock at the beginning of August, caused mainly by fears of a possible economic recession, indices resumed their growth, marking new historical records, as the Federal Reserve began to relax monetary policy. The US central bank cut its key interest rate by 50 basis points (0.5%) in September, the first rate cut since 2020, showing the Fed has become more concerned with supporting the economy as inflation it moves smoothly towards the target. Additionally, traders expect the Fed to continue monetary easing, with a 90% chance of another 25 basis point rate cut in November, according to the CME FedWatch Tool.

In this context, the S&P 500 index appreciated by 5.5% in the third quarter, while the Dow Jones rose by 8.2%. The Nasdaq Composite, of companies operating in knowledge-intensive fields, whose evolution is more sensitive to interest rates and which were more affected by the high rates applied by the American central bank, had an advance of 2.6%, in the quarter of third.

On our side of the Atlantic, where the European Central Bank cut interest rates by 25 basis points for the second time this year, the pan-European Stoxx 600 rose 2.2%, while in Frankfurt the DAX40 appreciated by almost 6% in the third quarter of the year.

• Falling prices and reduced volumes on the BSE, reflecting the absence of buying by institutional investors

At the Bucharest Stock Exchange, share prices fell and volumes thinned significantly, which shows, first of all, the absence of buying by large institutional investors.

The financial results of the companies related to the second quarter were mixed and overall in line with market expectations, and the general negative trend reduced the room for growth of the shares of the companies with positive results. In addition, the absence of information that would give a picture of the dividends that companies are likely to offer next year probably made investors sit on the sidelines.

Last but not least, the expectations are that our country will end the year with a massive budget deficit and there are two rounds of elections, which can bring economic and fiscal changes, so that it is possible for foreign institutional investors to reevaluate their perspectives towards Romania.

• TTS, One and TeraPlast - among the biggest decliners in BET

Shares of Transport Trade Services, along with those of One United Properties and TeraPlast, were among the biggest decliners in the BET index in the third quarter of the year. In the case of the river transporter, the quotation depreciated by 19%, given that the exports of products from Ukraine began to return to traditional routes, which affected the company's activity, a fact reflected obviously by the massive decrease in profitability, in the period April-June, the last for which there are reports.

Real estate developer One United Properties announced a massive 47% drop in second-quarter profitability amid lower revenue from real estate sales and reduced investment earnings, sending the company's share price down 16.6%. The company achieved a capital increase by which it attracted 340 million lei from shareholders, money that will support its activity, but on the other hand, a series of articles unfavorable to the company appeared in the online environment, which may affect the share price.

The shares of the manufacturer of construction materials TeraPlast depreciated by 11.9%, in the period from July to September, in a context in which the company reported an increase in revenues but entering into a loss in the second quarter, both under the influence of the operational result and of the financial one. The company made a capital increase by which it attracted 20 million euros, money that will be used to finance new acquisitions and cover the company's current needs.

• Decreases for most power producers

In a period when the Brent crude oil quotation had a 15% decline, the price of OMV Petrom shares depreciated by 4.7%, depreciation that includes the ex-dividend correction related to the special allocation in September. The oil and gas producer reported a net profit of 1.2 billion lei, for the second quarter of the year, due to the disappearance of the "solidarity tax", with the operating result having a slight decrease. The shares of Romgaz, OMV Petrom's partner in the Neptun Deep project, fell by 6.7% in the third quarter of the year, a decline that includes an ex-dividend correction. The company reported, for the April-June period, a 17% decrease in profit, as a result of lower gas prices compared to the same period last year, and attracted 500 million euros through a bond issue, money that will be primarily used for investments.

Hidroelectrica's shares had a sideways evolution, while Nuclearelectrica's shares depreciated by 7.6%, as the operator of the Cernavodă plant reported an almost 50% drop in profit in the second quarter, due to the lower price of electricity.

• Significant impairments for utilities

Utilities suffered declines, with Transelectrica shares down 13.6% in the third quarter, while Electrica shares fell 12.1%. Starting from September, the regulated tariff related to Transelectrica's system services decreased by 11%, according to an announcement by the company, whose shares recorded sessions with relatively high volumes, which suggests selling by some institutions.

In the case of Electrica, the results reported for the second quarter probably mattered, namely a loss of 25.6 million lei compared to a profit of 185.4 million lei in the same period last year, as a result of massive losses in the supply segment and a greater negative financial result.

• Aquila, Antibiotice and Sphera - the biggest increases in BET

Shares of Aquila, Antibiotice and Sphera Franchise Group had the biggest gains in the BET index for the third quarter of the year.

The shares of the distribution and logistics company for the consumer goods market appreciated by 18.1%, without obvious fundamental reasons to justify the evolution, in the conditions in which the profit of the second quarter stagnated. Sustained growth points to purchases by institutional investors with a long time horizon, who likely want to increase their exposure to a sector in which Aquila is a leader.

The shares of Sphera, the company that operates the Pizza Hut, KFC and Taco Bell public food chains, appreciated by 4.5%, between July and September, given that, in the second quarter, the company's profit increased by almost 60% In addition, Sphera is on the radar of private pension funds, which in recent months have steadily increased their holdings in the company's capital, according to the latest reported data.

Antibiotics stocks, which were included in the BET index on September 23rd, were up 12.2% in the third quarter of this year, in a continuation of the consistent uptrend started in the second part of last year, fueled by the company's results and the outlook for its prospects at least in the medium term.

Banking shares had a sideways movement in the third quarter of the year, a period with a slight growth of the sector at the European level, reflected by the evolution of the Euro Stoxx Banks index.

• BET-FI - the only growing index from BVB

The BET-FI index, of the former SIFs plus Fondul Proprietatea, had an advance of 5.4%, being the only share basket from BVB that appreciated, in the third quarter of the year, due to the evolution of SIF securities.

There are no obvious fundamental reasons for the rise in the valuations of these companies which, with one or two exceptions, are completely off the radar of retail investors or pension funds.

The Proprietatea Fund's shareholders have extended Franklin Templeton's administrator mandate for another year, i.e. until March 2026, and have rejected the Ministry of Finance's request regarding the preservation of the fund's current assets and the ban on share buybacks.

At the end of the month, the SIFs traded at discounts between the price and the Net Asset Unit Value (VUAN) located between 69% for Infinity Capital Investments and Lion Capital, respectively 47% in the case of Longshield Investment Group (former SIF Muntenia). For FP, the discount was 44%, above administrator Franklin Templeton's goal of under 15%.

• JT Grup Oil debuted in AeRO

Market The Ministry of Finance carried out two offers of Fidelis government bonds, in the third quarter of the year, the subscriptions being 2.1 billion lei and 3.2 billion lei, respectively.

The fuel distributor JT Grup Oil debuted on the AeRO Market, while the engineering and technology company Simtel Team transferred from the AeRO Market to the Main Market of BVB, between July and September 2024.

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