The prospect of Călin Georgescu winning the elections brought massive drops to the BVB

The prospect of far-right populist candidate Călin Georgescu winning the presidential elections brought massive drops to the Bucharest Stock Exchange (BVB) indices, in a month in which political instability in our country meant that the results of companies for the third quarter did not have a significant impact on share prices.

The BET index, of the twenty most liquid stocks on our market, depreciated by 6.3%, to 16,345 points, while the BET-BK index, the benchmark for the performance of equity investment funds, fell by 7.5%, to 3,016 points.

Călin Georgescu won the first round of the presidential election, striking out with a pro-Russian speech, criticizing NATO and the European Union, as well as foreign investors for having "too much presence in Romania's key utility sectors, following a wave of unjustified privatizations," and also stating that he "will use the first 100 days of his mandate to recover these assets," according to Politico.

President Klaus Iohannis declassified CSAT documents according to which the SRI had identified an aggressive promotion campaign for Georgescu, carried out outside the electoral law, and in the end the Constitutional Court annulled the first round of the presidential election, which is to be resumed from scratch, on a date to be established by the new Government, which is about to be formed following the Parliamentary elections.

• US indices have recorded their best monthly performance this year, following Trump's victory in the presidential elections

US market indices have had their best monthly performance this year, driven by Donald Trump's victory in the presidential elections, with Republicans also holding a majority in the US Congress. Markets perceive Trump's agenda, which includes possible tax cuts and regulatory easing, as favorable for the business environment and companies. In addition, the US economy is evolving better than expected, inflation is approaching the 2% target of the Federal Reserve, which is in a cycle of interest rate cuts, and the prospects related to Artificial Intelligence are still fueling company results.

In this context, the S&P 500 index appreciated by 5.7% last month, while the Dow Jones Industrial Average rose by 7.5%. The Nasdaq Composite, a gauge of companies in knowledge-intensive sectors, rose 2.9%, with all U.S. stock baskets hitting new all-time highs for the month.

On our side of the Atlantic, where the European Central Bank cut interest rates again last week, the STOXX 600 index rose 1% in November, while in Frankfurt, the DAX index rose 2.9%.

• Nuclearelectrica shares down 7%, while Romgaz shares fell 8%

Unlike Western markets, BVB indices saw massive declines, fueled by political developments. The BET-XT composite index, of the thirty most liquid companies on our market, fell 6.2% to 1,408 points, while the BET-NG index, of energy and utilities companies, fell almost 4.1% to 1,176 points.

Hidroelectrica proved its defensive nature, with a drop of only 1.3%, which has since been recovered. The electricity producer and supplier reported a 32% drop in net profit in the third quarter, to 841.8 million lei, mainly due to the reduction in energy production. The company, of strategic importance for our country and controlled by the state, is one of the main dividend issuers on the BVB, which makes it the classic candidate for a buy-and-hold approach.

Nuclearelectrica shares depreciated by almost 7% last month, during which the contract to build reactors 3 and 4 at Cernavoda was signed, and the company reported a 36% decrease in profit in the third quarter, mainly due to the decrease in the price of electricity sold. Nuclearelectrica has important investments to make, so analysts estimate lower dividend distribution rates than in the last few years.

In a month with low fluctuations in the price of crude oil, OMV Petrom shares depreciated by 3.5%. The oil and gas producer reported a 37.2% drop in operating profit in the third quarter, but for the first nine months net profit is up 54.1% to 3.9 billion lei, due to the lack of a "solidarity contribution". The company has adopted a policy of increasing dividends, which favors it for buy-and-hold approaches. In contrast, Romgaz, OMV Petrom's partner in the Neptun Deep project, distributed only 20% of its profit as dividends last year, compared to full distributions in other years, and the need for investments reduces the chances of a large allocation next year. The natural gas producer's shares depreciated by 8% last month, during which the company reported a 9.6% reduction in profit in the third quarter, to 436.4 million lei, in the absence of a "solidarity contribution".

• Utilities on the decline

In the utilities sector, Transgaz shares fell by almost 7% in November, with the natural gas carrier reporting a similar profit in the third quarter compared to the same period last year, while Transelectrica shares fell by 5.2%, even though the company reported a tripling of profits in the June-September period, a relevant image of the shock produced in the market by the political situation.

Electrica shares fell by 3.1% last month, with the electricity supplier and distributor reporting a 42.5% drop in profit in the third quarter, to 200.3 million lei, primarily due to lower energy prices. The company's shareholders approved the issuance of green bonds worth up to 500 million euros, an initiative that is part of the issuer's strategy to support the energy transition and sustainable development.

• Bank shares suffered a depreciation greater than the average of the European sector

The European banking sector had a slight decrease last month, but the depreciations of the shares of the main banks on the BVB were more severe. Banca Transilvania shares, a company with a policy of remunerating investors through dividends and free shares, had a decline of 6.5% last month, even though the institution reported excellent results, namely an increase of almost 150% in net profit, up to 1.76 billion lei, largely due to the reflection in the financial statements of the acquisition of OTP Bank Romania, but also due to operational activity.

BRD-Groupe Societe Generale shares had a depreciation of 11.4%, given that the bank reported a profit decreasing by 12.9% for the third quarter, due to the net cost of risk and the "turnover tax", which eroded profitability.

• TTS, One United and Antibiotice - the biggest decliners in BET

Shares of Danube freight forwarder Transport Trade Services fell 38.5% after the company reported a quarterly loss of 7.9 million lei, compared to a net profit of 95.5 million lei in the third quarter of 2023. The issuer gained following the outbreak of the conflict in Ukraine, which massively increased the company's revenues and profits, but now activity is normalizing, returning to near pre-war levels.

Shares of developer One United Properties fell 17.5% last month, the company's financial results reported for the third quarter, namely a 20.9% increase in net profit and 31% in operating profit, along with an improvement in margin, failing to stop the downward trend of the shares this year. In addition to corporate operations that may have brought some distrust among investors, One is facing a series of unfavorable press articles, while uncertainty about the fiscal framework for next year may affect its operations.

Shares of distribution and logistics company for the consumer goods market Aquila fell 16% last month, as the company reported a 25.3% drop in profit in the third quarter, as expenses grew at a faster pace than revenues. Shares of drugmaker Antibiotice fell 18.4%, primarily as a result of the sale of 16% of the company through a private placement by Infinity Capital Investments, at a price 20% below the market price.

• Trading discounts between 69% for Infinity Capital Investments and Lion Capital, respectively 48% in the case of Longshield Investment

The BET-FI index, of former SIFs plus Fondul Proprietatea, had a 3.3% decline last month, the smallest depreciation among the BVB stock baskets.

At the end of the month, SIFs were trading at discounts between price and Net Asset Value (NAV) between 69% for Infinity Capital Investments and Lion Capital, respectively 48% in the case of Longshield Investment. For FP, the discount was 53%, above the administrator Franklin Templeton's objective of below 15%. The American administrator announced that he will not participate in the ongoing selection process for the Alternative Investment Fund Manager of FP, which he has managed since 2010.

Last month, Romgaz listed the company's first bond issue, worth 500 million euros, on the Bucharest Stock Exchange. The issue, also listed on the Luxembourg Stock Exchange, is the first tranche of international five-year bonds, which will allow the company to issue bonds worth up to 1.5 billion euros. The money will be used mainly for investments, including the Neptun Deep project.

• 40% decrease in the value of transactions compared to October, when the last issue of Fidelis government bonds was listed

Last month, the total value of transactions with securities listed on the BVB Main Segment was 2.7 million lei, 40.3% below that recorded in October, when the last issue of Fidelis government bonds was listed.

The average daily value of transfers fell by 34.6%, to 128.7 million lei, for the same reporting period, a decline also influenced by Fidelis, as shown in the BVB Monthly Bulletin.

In November, 191,079 transactions with securities listed on the Main Segment of our stock exchange took place, 8.2% more than in October, with 822.5 million securities being exchanged through transfers last month, 52.2% more than those transferred in the previous month.

With transactions worth 320.3 million lei, Antibiotice shares occupy the first position in the top turnover of November, a position due to the sale of shares by Infinity. Banca Transilvania shares are in second place, which accumulated transfers of 274.6 million lei, followed by exchanges with Hidroelectrica shares, which amounted to about 251.5 million lei.

On November 29, the market value of all companies listed on the Main Segment of our capital market (including Erste Group Bank) was about 332.7 billion lei, down 3.2% compared to the one recorded at the end of October, according to the BVB monthly report.

We have entered the last month of the year, and the most important information for the market will also come from the political area, where the new Government is to be formed that will establish the country's economic policies.

Read Călin Georgescu - blocked on the way to Cotroceni