The expectations of BSE fund managers for 2024

Last year's spectacular evolution of the main shares on the Bucharest Stock Exchange (BVB), when the BET index increased by 32% and with dividends the advance rose to almost 40%, will not be repeated this year, according to the opinions expressed yesterday by fund managers from our country, during a press conference.

But, the evolution of our country's economy, an increasing pressure on the side of the demand for shares primarily from pension funds, which have more money at their disposal, the decrease in interest rates and a certain "calmness" from a fiscal point of view, are factors which will support the quotations from the BSE, this year, according to the fund managers.

• Robert Burlan: "The extraordinary performance of last year is difficult to replicate, but that does not mean that the potential is exhausted"

Robert Burlan, CFA, Head of Investment Management Raiffeisen Asset Management, expects the evolution of our country's economy to support the stock market.

The fund manager said: "It is foreseeable that we will have an acceleration of the economy compared to last year, from the area of 2% to 3%. It is important that this will be supported to a good extent by public investments, especially those from European funds and the Next Generation program. The whole country is studded with construction sites, highways where work is being done, which cannot but be reflected in the economic activity".

Robert Burlan added: "Inflation shows signs that it is no longer falling so fast, but let's not forget that it is no longer 16-17%, but 7.2%, and the central bank's forecast is that it will drop below 5% by at the end of the year. As such, there is room for the NBR to lower rates from the current level of 7%, which will most likely materialize in the coming months. Therefore, from this area the influence should be at least neutral to positive".

According to Raiffeisen Asset Management's Head of Investments, the extraordinary performance of our stock market last year is difficult to replicate, which does not mean that the potential is exhausted.

"Ultimately, the price in the market is the ratio between demand and supply. We see that demand is increasingly consistent, including from the area of pension funds where contributions have increased. We also have increasing inflows of money, which creates a natural need to invest. And in the context where pension funds already own about 40-50% of the free-float of large companies, i.e. of the freely tradable shares, it is clear that there is less and less supply. Therefore, the ratio between demand and supply is increasingly favorable to the positive evolution of the market, something that has also been seen in the past. In pandemic correction episodes since the start of the war, the local market has actually fallen less than foreign markets, and the recovery has sometimes been even faster. As such, even if there will be correction episodes, I think institutional investors and especially pension funds will act as stabilizers and capitalize on the moments as buying opportunities," said Robert Burlan.

• Dragoş Manolescu: "Overall we expect the Bucharest Stock Exchange to have a positive evolution, somewhere around plus 5% - plus 15%, at the end of the year"

Dragoş Manolescu, CFA, Deputy General Manager of OTP Asset Management, pointed out that, historically, in a cycle of falling interest rates, assets are revalued, which usually brings an increase in prices.

The director of OTP Asset Management stated: "In our opinion, in the absence of extraordinary events, the maximum point on inflation is in the past. In the normal scenario, the one with the highest probability of occurrence, peak inflation has been reached. We expect inflation to be lower, meaning that all major central banks, minus the Bank of Japan, are expected to cut interest rates this year. That is, the cycle of increasing interest rates has ended and the cycle of decreasing interest rates is coming".

Dragoş Manolescu added: "History tells us that in a cycle of falling interest rates, assets are revalued, which usually comes with an increase in prices (...). The impact on the listed companies will depend a lot on the business of each one and how it will report. For some the economic development may not be favorable and they may report weaker than in the past. And here we can look at energy. It was an exceptional situation with very high prices. But as long as the price of energy is lower and going down it is very clear that those companies will not report as well. Or, in this case, we should have some price corrections".

Overall, the team from OTP Asset Management expects the Bucharest Stock Exchange to have a positive evolution, somewhere around plus 5% - plus 15% at the end of the year, pointed out Dragoş Manolescu, probably referring to the BET index. According to the fund manager, in addition to the sectors that his team bet on last year and are still betting on, OTP Asset Management is also considering Digi Communications shares.

"In 2023 we overexposed to the energy sector, because various companies were cheap compared to the historical average. We are also overexposed to the banking sector - due to high interest rates the banking sector is one of the winning sectors. We have also exposed ourselves to the maritime transport sector - from a geostrategic point of view, the war in Ukraine also has winners in Romania, and Transport Trade Services is one of them. At the same time, we overexposed ourselves to the HoReCa sector. These are the sectors we are still betting on in 2024, but we have slightly reduced the exposure to the energy sector. For this year, we also find the cable TV sector interesting. It is a sector that has very large assets, we like Digi which seems to be the only local company that can expand in Europe and has a strategy for it. It is undervalued from the point of view of the value of the assets it owns and has a pricing power (n.r. the possibility of transferring cost increases in the final prices) that is hard to match," said Dragoş Manolescu.

• Rareş Trif: "Most local and international indices are at maximums and we have a war near us that we don't know how it will end"

Rareş Trif, the Investment Director of BT Asset Management, says that there are premises that the main stocks on the BSE will grow this year, but not to the extent of last year.

The fund manager stated: "The year 2023 brought a lot of very favorable factors, quite difficult to replicate at least in the near future. The valuations of the companies were very cheap, which combined with a significant flow of capital following the listing of Hidroelectrica. In 2024 we don't necessarily have these elements anymore, but I think we can still see increases, certainly not at the level of those in 2023".

Rareş Trif added: "Most estimates regarding Romania's GDP growth are somewhere around 3%, which could come mainly from two pillars. Consumption can be an important pillar. We also have to take into account the fact that public investments financed mostly by PNRR funds had a rather important contribution to GDP growth in 2023 and I think the same will happen in 2024. I hope that for years to come, as it is an opportunity that our country should not miss. In my opinion, companies in sectors that can contribute to GDP growth can continue to perform well."

On the other hand, the fund manager also draws attention to the year's challenges. "Most local and international indices are at maximums and we have a war near us that we don't know how it will end. Inflation also seems to be showing slight signs of recovery, or at least not falling at the rate we saw in 2023," said Rareş Trif. In his opinion, among the sectors that will perform this year are HoReCa - fast-food, the transport sector, distribution - logistics and, if interest rates will decrease in the second part of the year, the residential segment.

• Răzvan Paşol: "We expect a moderately positive year at the Bucharest Stock Exchange"

Razvan Paşol, the General Director of Patria Asset Management, expects a moderately positive year at the Bucharest Stock Exchange.

"We see economic growth and dare to hope for a gradual decrease in interest rates, even if at a slower pace than we would have expected. Therefore, we are likely to see stock price increases, but by no means as large as in 2023, which was an exceptional year. We must also take into account the fact that, at the beginning of 2023, we also started from a reduced base", said Răzvan Paşol.

The director of Patria Asset Management recalled that this year there will be elections in our country so, very likely, we will see some peace from a fiscal point of view. "The prospects are relatively good for 2024, but it remains to be seen what will happen in 2025", stated Răzvan Paşol.

• Adrian Dudu: "It is possible to see stronger oscillations of the stock market"

Adrian Dudu, the Investment Director of Certinvest, is of the opinion that this year the financial markets may have greater volatility.

"I expect this given the strong trend in the stock market since October 2022. Given that such a trend generally lasts a year and a half - two at most, we may see stronger stock market swings actions. I also think that for interest rates we may see a resumption of increases. Inflation has stopped falling and is likely to consolidate at these levels. Externally we see that inflation is showing signs that it may have hit lows, which would be natural given the acceleration in macroeconomic indicators starting in 2023. In general, a shorter-term acceleration in the economy results in rising inflation rates. We won't see inflation falling further as long as macroeconomic indicators show some sort of acceleration," said the Certinvest director.