The upward trend of the BVB indices has stalled

The vigorous upward movement developed by the main indexes of the Bucharest Stock Exchange (BVB) in July underwent a correction in August, in line with international market developments to which were added internal elements, such as fiscal uncertainty.

At a time when companies published their results obtained in the first half of the year, the BET index, which reflects the dynamics of the 20 most liquid stocks of our market, had two halves of the month with diametrically opposite developments, finally ending August with an increase of 0.22%. The BET-NG energy index depreciated by 0.41% in August, while the BETAeRO index, of companies considered representative of the Multilateral Trading System, declined by 1.69%.

• Declines in the United States and Europe

In the United States, the S&P 500 index depreciated by 1.77% last month, while the Nasdaq Composite index of knowledge-intensive companies declined by 2.17%. Mainly, the decline occurred when the indices had reached annual highs and from the minutes of the last meeting of the Federal Reserve it appeared that further increases in interest rates are possible, if inflation does not give sufficient signals of calming down. Even if no more interest rate hikes are forthcoming, the US central bank is expected to keep interest rates high for an extended period, which at one point pushed the yield on ten-year US Treasuries to the highest since 2007.

In Europe, where the central bank started the monetary tightening cycle later than the Fed and more rate hikes are likely to follow, the Stoxx 600 lost 2.79% last month, while Frankfurt's DAX 40 had a rebound of 3.04%.

• The government is considering changing the fiscal framework for BVB investors

At the Bucharest Stock Exchange, the BET-BK index, the yield benchmark for investment funds in shares, had a decline of 0.85%, while the BET-XT index, for the 30 most liquid securities of our market, it ended the month at the same level it ended the previous one.

At the beginning of August, a "draft" appeared in the press regarding a series of tax changes envisaged by the PSD-PNL coalition, which Finance Minister Marcel Boloş later said did not represent the updated form of the legislative proposal that will change some tax rules from our economy. Measures with a direct impact on investors' portfolios include increasing capital gains taxes to 3% or 5% (from 1% and 3%) depending on the holding period and increasing the dividend tax to 10% (while it was already increased at the beginning of this year from 5% to 8%). According to another draft "leaked" later in the press, the taxes on gains from stock market transactions would even decrease, to 0.5% (for holdings of more than one year) and 1.5% (for holdings of less than one year), but interest on newly issued government bonds will be taxed at 10%. As written above, these are "drafts", which means they are not final and may undergo changes.

Also last month, the main BSE companies presented their results for the first part of the year, but looking at the whole, the sequence of price increases and decreases shows a high correlation between our market indices and international stock exchanges, which suggests that the external environment of had a greater influence on BSE shares.

• Nuclearelectrica, Transport Trade Services and Electrica - the best developments in BET

With an increase of 4.44%, to 47.05 lei, the shares of Nuclearelectrica (SNN) had the best evolution in the BET, last month. The appreciation is largely due to a 3.18% gain on the last day of the month, which came on the back of well-above-normal volumes for SNN stocks, indicating buying by institutional investors. In the first half of the year, the company increased its turnover by 20%, while the net profit increased slightly, by only 5%.

Shares of Transport Trade Services (TTS) appreciated by 4.26% to 19.6 lei in a month in which it announced new contracts of more than 31 million euros and reported a profit 153% above that of the first six months of last year. Port operating activity has surpassed that of river transport, and Russia's conclusion of the agreement on the free passage of grain exports from Ukraine puts the company in a favorable position.

Electrica (EL) shares appreciated by 3.26%, to 9.5 lei, as the supplier and distributor of electricity reported, for the second quarter of the year, a net profit of 173 million lei, compared to a loss of 18 million lei in the same period last year.

Hidroelectrica (H2O) shares ended the month at a unit price of 113 lei, up 0.71% compared to the end of July, and above the price at which the public offer ended, of 104 lei.

• Bucharest Stock Exchange, TeraPlast and Transgaz - the biggest declines in the main share basket of our market

In terms of declines, the list is led by the titles of the Bucharest Stock Exchange, which fell by 9.93%, last month, to 52.6 lei, in the context in which our capital market operator reported a decline of 59% of profit, in the first half of the year, compared to that of the first six months of 2022. The BVB share price had a strong increase throughout last year and this year, against the background of the prospects of Hidroelectrica's listing, but especially of the approaching elections for a new Council, which made Romanian institutional investors buy BVB shares, in order to have a greater voting power.

TeraPlast (TRP) shares depreciated by 9.56% last month, to 0.454 lei, after at the end of July, the construction materials producer reported a loss in the first half of the year, against a profit of 16 million of lei, in the first six months of last year. Transgaz (TGN) shares fell by 9.39%, up to 16.6 lei, as the company reported a 60% decrease in profit in the first half of the year.

The shares of Sphera Franchise Group (SFG) depreciated by 4.37%, last month, to 19.7 lei, while the shares of MedLife fell by 3.44%, to 18.54 lei. Transelectrica shares depreciated by 3.68%, up to 26.2 lei.

In a month in which the Euro Stoxx Banks index had a slight decrease, the shares of Banca Transilvania (TLV) appreciated by 1.94%, to 21 lei, while the BRD-Groupe Societe Generale (BRD) securities down by 0.14%, up to 14.68 lei. The credit institution from Cluj proposed the granting of dividends with a yield of about 5%, and reported a 40% increase in profitability for the first six months of the year. In the case of BRD, profitability increased by 24% in the middle of the year, but the bank did not propose the allocation of dividends.

• Trading discounts between 67% for Lion Capital and 50% in the case of SIF Muntenia

The BET-FI index, of SIFs plus Fondul Proprietatea (FP), rose by 0.16% in August, due to the evolution of FP shares, which appreciated by 1.46%, up to 1.946 lei. Last month, the fund's shareholders approved the distribution of a special dividend of 1.7225 lei, from the proceeds of 9.28 billion lei from the sale of the share package held in Hidroelectrica. Compared to FP's share price at the time of approval, the dividend amount equates to a gross yield of 90%.

At the end of the month, the SIFs traded at discounts between the price and the Net Asset Unit Value (VUAN) between 66.6% for Lion Capital (former SIF Banat-Crişana) and 50% in the case of SIF Muntenia, while what FP had a discount of 18.2%.

We entered the month of September, and at the Bucharest Stock Exchange, a number of important companies from the AeRO Market are to publish their results for the first six months of the year. In the United States, September has historically been the weakest month of the year, and the current environment is difficult for risk assets. The Federal Reserve remains hawkish even after eleven interest rate hikes, and investors have extended their horizon for potential cuts into next year. The equity risk premium, which quantifies the extra return investors can expect for owning stocks over bonds, fell to its lowest level since 2009, which some analysts see as a wake-up call for stocks. Abroad, China's economic woes are causing fears in markets around the world as Russia continues its war against Ukraine, according to Business Insider.

It remains to be seen how the American market will evolve this month and what will be the impact on the dynamics of share prices on the Bucharest Stock Exchange.