Bucharest Stock Exchange index reaches its highest level in nine years

The main index of the Bucharest Stock Exchange, BET, passed the 8,000 points mark on Wednesday morning, reaching its highest level in the last nine years. The BET was last seen over the 8,000-point mark in January 2008, before the financial crisis hit Wall Street. The BET, which includes the most important ten companies traded on the Bucharest Stock Exchange (BVB), has gained 13% since the beginning of this year and over 25% in the last 12 months. The positive trend of the local stock market in the last 12 months has been supported by the favorable international context and the good evolution of the Romanian economy, which also translated into improved results for some of the biggest companies listed on the Bucharest Stock Exchange. The U.S. markets have reached new all-time highs in recent weeks, with the Dow Jones Industrial Average (DJIA) passing the historical 20,000 points mark. The biggest markets in Europe are also close to record levels. Meanwhile, the Bucharest Stock Exchange is still far from the historical levels reached in 2007. In the summer of 2007, the BET passed the 10,000 points mark. “The BET has gained over 10% since the beginning of this year. It’s probably the best start of the year we have seen in many years,” said Lucian Anghel, BVB Chairman of the Board quoted by Agepres. The shares of local investment fund Fondul Proprietatea (FP), lender Banca Transilvania (TLV), and oil and gas group OMV Petrom (SNP), which make over 55% of the BET, all went up by more than 13% since the beginning of this year. “There are several reasons for this. First of all, Romania’s macroeconomic situation shows very good perspectives for this year with an estimated economic growth well above the EU average. Secondly, research reports show that Romania has the highest dividend yields for the blue-chip companies in the world. There are companies that will pay dividends of more than 10% of their current share price a few months after the general shareholders’ meetings,” Anghel explained. The big companies listed on the Bucharest Stock Exchange have also offered good returns in 2016. While the BET index only gained 1% in 2016, the BET-TR index, which takes into account the total returns offered by the companies in the BET, including their dividends, went up by almost 10% last year. With interest rates on bank deposits and yields on treasury bonds at historical lows, more local investors have thus been looking to diversify their portfolios by investing in listed shares. The biggest demand for shares comes, however, from local pension funds, which have reached assets of over EUR 7 billion, some 20% of which are invested in listed shares. Pension funds get constant capital inflows, part of which go to the stock market. The Bucharest Stock Exchange has also been getting more attention from international investors after it has been placed on FTSE’s monitoring list for a potential upgrade from frontier to emerging market. Such an upgrade would bring bigger funds and more money to the local market, but the main obstacle holding BVB back is the low liquidity. In 2016, the average daily turnover in share trading on the BVB was under EUR 8 million. The listing of power producer Hidroelectrica, the most valuable company in the state’s portfolio and arguably the most valuable company in Romania, may help the Bucharest Stock Exchange make the leap to emerging market status, with positive effects on the evolution of local shares.