The main index of the Bucharest Stock Exchange, BET is still 37.6% below the peak in the summer of 2007, while the main foreign stock markets, helped by the programs of the central banks in their countries break record after record every month.
The S&P rose 0.8% on Wednesday to a new all-time high of 1957 points after Fed chair Janet Yellen reassured investors the interest rates would only increase in small steps and the valuations of the US stocks were no reason for concern for the Fed.
In Europe, the European Central Bank has recently announced one of the most comprehensive economic stimulus packages and the institution head said he might resort to unconventional measures to stimulate the economy by asset purchases (quantitative easing).
ECB cut the monetary policy rate to a new record low, from 0.25% to 0.15% at the beginning of the month and lowered the rate for deposits made by banks to –0.1%, thus becoming the first major central bank charging banks for their deposits with it.
The steps met with optimism from investors on the German stock market, who took quotes to new record highs, so DAX overshot the 10,000 point mark for the first time.
“The steps ECB took are meant to encourage investment in financial assets, among others, and European capital markets will continue to benefit from such policies. Our outlook for the European markets remains positive, as the DAX has the potential to appreciate to 10,250 points by yearend according to our base scenario,” says Dan Rusu, head of the research department with brokerage firm BT Securities.
“Of course, a favorable European context can only have a positive influence on the Bucharest Stock Exchange. We’ll keep our optimistic expectations we announced since the beginning of the year, even leaving out the European influence.”
He expects the BET-FI, which tracks the regional investment funds (SIF) and Fondul Proprietatea (FP.RO) to return to 30,000 points by yearend, 5.8% above the current level, while BET should gain about 10% to 7,400 to 7,500 points in the second half, even though it will struggle around 7,000 somewhere along the way.
“The monetary conditions in the euro zone were already very relaxed at the time of the latest announcement by ECB. Besides a rate cut, including the deposit rate (-0.1% now), ECB signaled it was getting ready for a real QE in the euro zone,” says Mihai Nichisoiu, international market analyst with brokerage firm Tradeville.
“In a favorable environment anyway, investors will use the latest decisions of the ECB as reason to continue to buy on the euro zone stock markets. In the grand scheme of things, the Bucharest Stock Exchange cannot be significantly out of sync with the trends we are seeing in euro zone and the US, so our market can be favorably influenced by the new monetary approaches of ECB.”
Some brokers say the gap between the foreign stock markets and the Romanian stock market shows that domestic policies are not headed in the right direction and it could be quite a while before the Bucharest Stock Exchange peaks.
“The populism and the way the authorities see the stock exchange are affecting the market. To get to highs again, we would need to recreate the conditions of 2007. When the growth pace of the economy, the unemployment rate and the taxes revert to the 2007 levels, lending will resume and we will benefit from a favorable political environment; only then the Bucharest Stock Exchange will reach its peak,” said Adrian Manaila, general manager of brokerage firm Eldainvest based in Galati.
Conpet Ploiesti (COTE.RO) and Aerostar Bacau (ARS.RO) are the closest to reaching their peaks and they only need 4% to do it.
Another two major companies close to their all-time highs are OMV Petrom (SNP.RO) and Banca Transilvania (TLV.RO), which should go up by 32% and 39% form the current levels.
BRD shares are at one third of their highest and should gain 207% to match 2007 level, while the SIFs should gain up to 400% to get back what they lost in the meantime.
(English version by Loredana Fratila-Cristescu)