What fueled the rise of the BET index this year?

The BET index, of the most important companies from the Bucharest Stock Exchange (BVB), has been marking a series of new historical records for more than a month, the main share basket of our capital market recently exceeding the 17,000 point threshold.

The trend manifests itself in a general international context favorable to the stock markets, to which are added internal elements such as the dividend proposals of the main BSE companies, the estimates of this year's results and the larger purchases of the Pillar II pension funds, say analysts and the brokers.

From the end of last year to the beginning of this week, BET was up 10.8%, after the basket of shares advanced almost 32% in 2023.

• Aurelian Dochia: "A portfolio on the stock market remains among the few investment options with prospects of high returns"

Economic analyst Aurelian Dochia highlights the fact that the appreciation of our market is in tune with the evolution of foreign markets, where a decrease in monetary policy interest rates by central banks is expected.

He told us: "Stock markets around the world have gone through a period of optimism that, in my opinion, slightly exceeds expectations regarding the economy. Although the dynamics of the economy are positive, the valuations reached by the shares on the main stock exchanges are extremely high. For example, the Price to Earnings (PER) ratio indicates some particularly high valuations and it is hard to believe that they are sustainable in the long term. I believe that this favorable period for the stock market is also related to the expected decrease in interest rates, which causes some of the financial resources of investors to go to stocks. Also, in the current context, a portfolio on the stock market remains among the few investment options with prospects of high returns".

The economic analyst added: "In Romania, pension funds receive significant capital month after month that they have to invest. However, a good part of this money goes to the stock market, which causes the share price to rise. On the other hand, as usually happens, this growth attracts the attention of other people who start investing. A virtuous circle is created which, at the moment, is favorable".

Since the beginning of this year, monthly contributions to mandatory private pension funds have increased from 3.75% to 4.75% of taxable income of employees. The funds invest about a quarter of their money in shares, mostly listed on the Bucharest Stock Exchange.

• Dragoş Mesaroş: "Until June we may still have increases, but not by 10% as in the first quarter"

Dragoş Mesaroş, director of trading at brokerage Goldring, says issuers with large weightings in the BET index have proposed dividends with high yields, which has supported the increase in share prices. Among the broker's highlights are Hidroelectrica, OMV Petrom, BRD and Banca Transilvania, which proposed a combination of dividends and free shares.

Hidroelectrica's management wants to distribute all last year's profit to shareholders, namely a dividend of 13.99 lei, with a gross return of 10.4% compared to the closing price of the share at the beginning of this week. OMV Petrom has proposed a dividend with a gross yield of 6.1% and, in addition, there is the prospect of additional dividends. Banca Transilvania wants to grant a dividend with a yield of 4.5%, along with the allocation of 148 free shares per 1,000 owned, while, in the case of BRD, there are two dividend options, with yields of 6.5%, respectively 5.4%.

In addition to dividends, the Goldring director also notes the companies' Income and Expenditure Budgets. "Banca Transilvania estimates a profit of three billion lei for 2024, an increase compared to last year's 2.5 billion lei. OMV Petrom has budgeted higher revenues and profits in 2024, especially since they would no longer have to pay the solidarity tax that took quite a lot of their money (n.r. last year). Hidroelectrica estimated declining profits, but the company operates at high margins (...), says Dragoş Mesaroş.

OMV Petrom has budgeted for this year a net profit of almost 5.2 billion lei, 31% above that of 2023, while Hidroelectrica estimates a profit of 4.8 billion lei, below last year's 6, 3 billion lei, which was still a historic result. "For now, mostly the information related to the main companies in BET, especially those regarding dividends and the Revenue and Expenditure Budgets, has been positive", says Dragoş Mesaroş, adding: "In addition, from this year the monthly contributions to the Pillar II funds have increased, which can be seen in the price of the most important shares on the BSE".

From the broker's point of view, until the balance sheet shareholders' meetings at the end of April, when the dividends proposed by the companies' managements will be voted on and then, until June (n.r. when there are many registration dates for the allocation of money to investors) , it is possible that the prices of the main shares on the BSE will appreciate further.

"It probably won't be a 10% increase like in the first quarter, but in any case I don't expect any declines, unless some completely unforeseen event occurs. Then from June I expect interest rates to start falling in the Eurozone, the UK and the US, which only brings more money into the capital market," concluded the Goldring director.