Bucharest Stock Exchange has lost a third of its capitalization this year amid COVID-19 crisis

The Bucharest Stock Exchange (BSE) has lost 34% (EUR 13.2 billion) of the total market capitalization from the start of the year, since the first news about the new coronavirus (COVID-19), according to a report by PwC Romania.

Thus, the decrease since the beginning of this year exceeded the increase of 23.4% recorded in 2019 compared to 2018, which marked the best performance of the BSE since the previous financial crisis.

However, in the last 8 years the average yield registered by the stock exchange indices has exceeded the government bonds yield.

In 2019, BSE's capitalization increased by 23.4% to EUR 37.8 billion, sustained by high dividend yields, local economic growth above the EU average, promotion to the emerging market status and a series of changes to the legislative provisions.

In the context of COVID-19, BET, the main BSE index, fell by about 25% between December 30, 2019, and March 30, 2020, from a 35.1% increase recorded last year. The same decrease was registered by the BET-TR index, which includes the first 17 most traded shares, after an advance of 46.9% in 2019.

“The current context of COVID-19 has had a direct impact on capital market development, as a result of investor fears regarding the pandemic. Due to the massive depreciation of the shares, we find that in March 2020, both the volume and the traded value doubled compared to December 2019,” said Sorin Petre, Partner PwC Romania.

However, on the long term, the stock exchange has compensated investors for taking higher risks. Thus, from January 1, 2012, to March, 30, 2020, the median excess return of BSE indices exceeded the risk-free rate by 4.8% for BET and 13.9% for BET-TR, PwC has calculated.

(Photo source: Inquam Photos/Diana Oros)