The BVB indices entered a corrective phase, triggered by the turbulence in foreign markets

The long-term upward trend of the indices of the Bucharest Stock Exchange (BVB) entered a corrective phase in August, primarily due to the contagion with foreign markets that suffered a severe fall at the beginning of the month. The BET index, of the twenty most liquid stocks on our exchange, fell 2.58% last month, while the BET-BK index, the performance benchmark for equity investment funds, depreciated by 1 .95%.

The dynamics appear at a time when the main narrative of the markets is related to the conduct of central banks, led by the Federal Reserve, which through their monetary policy decisions must find a balance between supporting economies that show signs of weakness and reducing inflation which, although decelerating, it is below the banks' long-term targets.

• Jerome Powell gave the clearest indication yet that the Fed is going to cut interest rates

The S&P 500 index in the United States rose 2.28% last month, while the Dow Jones gained 1.76%. The Nasdaq Composite, of companies operating in knowledge-intensive fields, had a slight advance of 0.65% in a month with unprecedented volatility since the Covid pandemic.

Data from the labor market, which showed that the economy is declining at a faster pace than expected, which rekindled investors' fears about a possible recession, the results of several big names in technology that questioned the growth prospects of companies and the decision The Bank of Japan's interest rate hikes were elements that sent shockwaves through the US stock market at the start of the month. Later developments in the indexes, which almost recovered the fall, showed that the market reaction was exaggerated, as Fed Chairman Jerome Powell gave the clearest indication yet that the bank is going to cut interest rates.

Traders are betting on a key interest rate cut by the Federal Reserve this month, with a 30% chance the bank will cut as much as 50 basis points (0.5%), according to CME FedWatch Tool data from late last week.

In Europe, where interest rate cuts are also expected in September, the Stoxx 600 rose 1.32% last month, while the DAX rose 2.15% in Frankfurt.

• Aquila, Sphera and MedLife - among the best performers in the BET index

At the Bucharest Stock Exchange, the companies presented their results for the second quarter, respectively the first semester, and the market reaction, which was massively influenced by the dynamics of foreign stock exchanges, suggests that the results were, by and large, in line with expectations. The increase in tariffs was reflected in the revenues of the utility companies, the reduction in the price of electricity had an impact on the producers, while the still high interest rates provided increasing revenues to the banks.

The shares of the distribution and logistics company for the consumer goods market Aquila had an increase of 6.06%, last month, without the results justifying this evolution, namely a profit increase in the second quarter of 3%, up to 15.7 million lei, but a decrease in profitability for the first semester. Thus, the dynamics suggest constant acquisitions by high-profile institutional investors, such as the Metropolitan Life pension fund, which recently announced that it owns more than 5% of Aquila.

Sphera Franchise Group, operator of KFC, Pizza Hut and Taco Bell, along with private healthcare provider MedLife are BET companies whose shares appreciated last month. Sphera reported a profit of 19.2 million lei in the second quarter, almost 60% above that of the period April-June 2023, and wants to distribute an additional dividend with a gross yield of 2.6%. The company is on the radar of pension funds that have steadily increased their holdings in Sphera's equity in recent months, according to the latest reported data.

MedLife Group reported a profit of 4.3 million lei for the second quarter, compared to a loss in the same period last year, while for the first six months, the company's profit tripled. The company with a medical profile is also a favorite of pension funds.

• Declines for oil and gas producer securities

In a month with slight drops in oil prices, OMV Petrom shares depreciated by 4.31%, a decline that also includes the ex-dividend correction related to the special allocation with a yield of 3.8% compared to the share price on the day the distribution was approved . The oil and gas producer reported a profit of 1.2 billion lei, for the second quarter, compared to a loss in the period April-June 2023, due to the disappearance of the "solidarity contribution" paid by OMV Petrom last spring.

Romgaz shares depreciated by 2.87%, in a month in which the company reported a net profit of 591 million lei, 17% below that of the second quarter of last year, the decline occurred in the context of the drop in the selling price of natural gas and the increase of some expenses. On the other hand, the company no longer paid the "solidarity contribution", which positively influenced the results.

• The decrease in the price of electricity affected the results of Hidroelectrica and Nuclearelectrica

Hidroelectrica shares fell by 1.53% last month, while Nuclearelectrica shares depreciated by 5.22%. Hidro reported, for the second quarter, a net profit of 1.36 billion lei, 39% below that of the same period last year, in the conditions of the decrease in revenues due to the decrease in the quantities sold and the selling prices in the segment wholesale and supply.

In the case of the nuclear power producer, the net profit decreased by 46.4%, up to 279.8 million lei, also against the background of the decrease in the selling price of electricity and the quantities sold.

• Growth for Transelectrica shares; significant drop for Electrica titles

The shares of the electricity carrier Transelectrica appreciated by 2.86% last month, as the company doubled its profit in the second quarter of the year, to 160.3 million lei, as a result of the increase several income categories and a financial gain. At the end of August, the rating agency Moody's reconfirmed the Baa3 (investment grade) rating for the company's long-term debt, as well as the stable outlook.

Transgaz shares depreciated by 2.04% last month, with the company reporting a quarterly loss of 86.5 million lei, higher than the one in the April-June 2023 period, the increase in revenues being canceled out by an increase at a slower pace accelerated expenditure (with royalties, with personnel or those with maintenance and transport). Conpet shares fell 4.33% even as the crude carrier reported rising revenue and profit for the second quarter.

The shares of Electrica, a company dealing with the distribution and supply of electricity, depreciated by 9.84%, in a month in which the issuer announced a loss of 25.6 million lei, for the second quarter, compared to a profit of 185.4 million lei in the same period last year, following massive losses in the supply segment and a larger negative financial result.

• Slight declines for bank stocks

The main BSE banks had slight depreciations, in line with the evolution of the sector at the European level, illustrated by the dynamics of the Euro Stoxx Banks index. Banca Transilvania increased its profit by 36.2%, in the second quarter of the year, up to one billion lei, on the back of the increase in most income categories, while the increase in expenses was slower. On the other hand, in the case of BRD, expenses increased at a faster pace than income, which, together with a negative net cost of risks, caused the net profit to decrease by 13.7%, up to 367.3 million lei.

The difference between the results reported by the two banks was not reflected in the share price, probably as a result of a legislative provision according to which the investments of the Pillar II pension funds cannot exceed 5% of the assets under management. However, as in the case of the bank from Cluj, the investments of some funds are at the limit of this threshold, they probably focused on BRD securities, which created a greater demand for the bank with a French majority shareholding.

• Trading discounts between 71% for Infinity Capital Investments and 50% in the case of the former SIF Muntenia

The BET-FI index, of the former SIFs plus Fondul Proprietatea, had a decline of 0.31%, the smallest decrease among the BSE indices, last month.

The depreciation was caused by the dynamics of FP shares, which had a setback of 8.71%, last month. The Ministry of Public Finance, which owns 6.5% of the fund, wants the administrator Franklin Templeton to no longer be able to buy back his own shares and preserve the current portfolio, that is, for FP to stop selling its holdings.

Currently, the fund has submitted to the Financial Supervisory Authority the documentation related to the public offer for the redemption of at most 269 million own securities, but whose approval is delayed. FP lost its importance after the sale of the 20% stake in Hidroelectrica, so pension funds and probably other institutional shareholders are reducing their holdings in the company.

At the end of the month, the SIFs traded at discounts between the price and the Net Asset Unit Value (VUAN) between 71% for Infinity Capital Investments and 50% in the case of Longshield Investment Group (formerly SIF Muntenia). For FP, the discount was 42%, above administrator Franklin Templeton's goal of under 15%.

• JT Grup Oil debuted in AeRO Market; Simtel has moved to Main Market

The Ministry of Public Finance collected a record amount of 3.23 billion lei from the public, through the last Fidelis government bond offering held last month, over the previous record set in April, of 3.19 billion lei. The securities, which were listed on the Bucharest Stock Exchange, have interest rates between 5.8% and 7% for those denominated in lei, respectively 4% and 5% for euro securities.

The fuel distributor JT Grup Oil debuted on the AeRO market, after an offer through which it collected about 20 million lei from investors, the stock market valuation of the company at the end of August being about 125 million lei. Also last month, the engineering and technology company Simtel Team transferred from the AeRO Market to the BVB Main Market, the issuer's valuation being 420 million lei, at the end of August.