Romania Capital Markets overview: We are Emerging! | Pension hike worries investors | Liquidity increases
Romania Insider has started a new newsletter, the Capital Markets monthly newsletter, put together by editor in chief Andrei Chirileasa, who has 16 years of experience in monitoring and reporting about Romanian capital markets.
Below you will find the full content of this October 2020 newsletter, published on our website with the support of our sponsor Bitcoin Romania. The Capital Markets newsletter is sent to Ultra members of Romania Insider - check options to receive this newsletter here.
We are Emerging! But where is the growth?
The big news of the last month was Romania’s upgrade to Emerging Market status by FTSE Russel, one of the major international providers of stock indices. Following this promotion, the first Romanian companies – Banca Transilvania (TLV) and Nuclearelectrica (SNN) - were introduced in FTSE Russell indices followed by investors in emerging markets. A historic moment, as Government and BVB representatives called it, putting Romania “one click away from billions waiting to be invested.”
Realistically, this is one small step in the development of the local capital market, which still needs to convince more local companies to get listed in order to grow. Meanwhile, Romania still needs to gain the foreign investors’ trust by pursuing coherent fiscal policies. For the moment, Romania is getting closer to have its rating downgraded to junk by the major international rating agencies because of the 40% pension hike voted by the Parliament just before the local elections on September 27 - expected to get the budget deficit off track in the next years. Such a decision would increase the financing costs for the Romanian state and local companies, with negative consequences on the local economy and the capital market.
Thus, instead of a positive evolution of the BET due to Romania’s promotion to Emerging Market, the Bucharest Stock Exchange saw a correction due to the Parliament’s decision on increasing pensions. The BET is down 4.3% in the last month and investors remain cautious.
The most important milestones in Q4 are the decisions of the three international rating agencies on Romania’s rating: Moody’s on October 23, Fitch on October 30, and S&P in December. Then, there are the general elections that will take place on December 6, if the Parliament doesn’t postpone them due to the pandemic. On the macro front, the National Statistics Institute (INS) will release the first Q3 GDP data on November 13.
Big transactions with Banca Transilvania shares
Banca Transilvania (TLV), the biggest lender in Romania by assets, was again the most traded company on the Bucharest Stock Exchange in the last month. The large transactions came as the bank’s shares were included in FTSE Russell’s emerging markets indices. However, the high turnover wasn’t accompanied by a growth in the share price. On the contrary, the price went down 10% in the last month, one of the most significant corrections on the Bucharest Stock Exchange.
The shares of oil and gas group OMV Petrom (SNP) also went down by almost 12% in the last month, as the company reported lower operating results amid adverse market conditions. Fondul Proprietatea’s sale of a 3% stake in OMV Petrom through a private placement also put pressure on the share price.
Several large deals were also recorded with other blue-chip companies as the Paval brothers, who are among the biggest investors on the local capital market, transferred some stakes between the companies they control.
Building materials producer Teraplast Bistrita (TRP) recorded the highest growth in the last month (of the more liquid shares at the BVB) – 8.9%. The company’s shares were also included in a FTSE Russell index dedicated to small-cap companies. Moreover, Teraplast announced new investments, that will be partly financed with state grants. Medical services provider Medlife (M) also recorded a 4.6% increase in the last month.
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THE BIG PICTURE
Romania’s economic contraction in Q2, slightly softer than initially reported
Romania’s industrial output still 12% behind pre-crisis level
Romania’s August foreign trade data confirm slower recovery scenario
Romania's retail sales pause post-lockdown recovery in August
Romania’s inflation rate falls to 2.5% in September
FDI to GDP ratio in Romania eases slightly to 2.3% of GDP in 2019
Romania’s forex reserves shrink in September after Eurobond repayment
Romania’s public deficit hits 5.2% of GDP in Jan-Aug
Romanian budget revenues remain strong in September
Romania’s public debt to GDP ratio rises by another 2pp in July
Average net wage in RO, up 2.6% in real terms in Mar-Aug
Romanian companies more willing to hire in September
Registered unemployment rate in RO slightly up at 3.3% in August
Romania’s economy uses 7.5% less electricity in Jan-Aug
RO banks keep widening interest rate spread in August
New bank loans in March-August down 15% year-on-year
Bank lending in RO keeps supporting consumption more than companies
Stock of large-sized bank deposits in Romania rises by 8.9% in H1
Romania’s currency reaches new record low versus the euro
Official forecasts and independent projections
Romania’s economic growth in Q3 likely in the lower single-digit area
EBRD lowers forecasts for RO and entire region on prolonged COVID-19 crisis
WB: EU grant funds will be critical for Romania’s growth recovery
Erste Group expects Romania to halve budget deficit by 2022
BCR chief economist says monetary policy rate could remain unchanged by 2022
Foreign banks expect an exchange rate of RON 4.9 to EUR at end of 2020
Romanian analysts’ sentiment still down despite August rise
Political decisions that shake the markets
Romania’s Parliament ignores all warnings and votes 40% increase in pensions amid battle for votes
Romania's Constitutional Court rules Govt. should double child allowances
Romania’s 40% pension hike prompts anxiety among investors
President: RO risks losing EU funds, downgrade if enforces 40% pension hike
Romanian central bank official: rating agencies are losing patience
S&P trusts RO Govt. can defer, then roll back 40% pension hike
Romania on S&P’s list of potential “falling angels”
RO FinMin expects S&P to upgrade outlook to stable in December
Romanian FinMin ponders prolonging loan repayment moratorium
RO Govt. resumes subsidies for technical unemployment in HoReCa
RO will issue more Eurobonds this year only if SURE money doesn’t come in time
RO Govt. to amend Offshore Law in line with investors’ expectations, after elections
US agrees to build and partly finance two new nuclear reactors in RO worth USD 8 bln
Romanian regulator still working on exit rules from private pension funds
Romania becomes Emerging Market
A historic moment: Romania officially enters the emerging markets league on Monday
Romania becomes emerging market – Fin. min: We are one click away from billions looking to be invested
Transactions on Bucharest Stock Exchange triple amid FTSE Russel’s upgrade
News about listed companies
FP, SNP: Romania’s Fondul Proprietatea cashes in EUR 115 mln from OMV Petrom sale
SNP: OMV Petrom begins production-sharing negotiations with Georgia
SNP: OMV Petrom reports non-cash net impairment under revised oil price forecast
SNP: OMV Petrom’s operations keep dwindling in Q3, except for power segment
SNG: Romgaz blames gas release program for lower earnings, deferred investments
SNG: Romgaz will deliver gas to Bucharest’s heat supplier for another year
SNG, SNP: Gas price on RO market lags behind CEGH benchmark on subdued demand
TGN: Transgaz sells 25% of strategic pipeline in Moldova to EBRD
TGN: Transgaz seeks EUR 74 mln loans for investments
EL: Merger of its subsidiaries might cost Romanian group Electrica EUR 128 mln
TLV, BRD: Seven Romanian banks selected to distribute the EUR 1 bln grants to SMEs
TRP: Wood&Co. issues buy recommendation for Romanian industrial group TeraPlast
TRP: TeraPlast applies for state aid for EUR 7.9 mln project
CMVX: Romanian company opens biggest local grain terminal after EUR 56 mln investment
SFG: KFC Romania launches its own online ordering platform
HAI: RO farming group Holde Agri lists its shares on BVB
HAI: RO farming group Holde Agri closer to EUR 40 mln financing after listing
Other investment opportunities
Romanian unicorn UiPath prepares for listing
Romanian cybersecurity firm to list shares after private placement
RO crowdfunding platform SeedBlink to list three new projects in October
Romanian dairy producer to issue EUR 2-3 mln bonds
Romanian low-code startup aims to draw USD 1 mln on US equity crowdfunding platform
B2B marketplace for RO hospitality industry gets EUR 350,000 financing
RO tech start-up gets financing to convince online buyers who abandon virtual carts
RO oncology big data project seeks financing on crowdfunding platform
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