September 22 was the first day for the BET-Total Return index, which started from 7,866.65 points. The index includes the stock of the ten most liquid companies (Fondul Proprietatea, Petrom, Romgaz, Banca Transilvania, BRD, Electrica, Transgaz, Transelectrica, Nuclearelectrica and BVB). Beside the trend of the ten stocks, the index will also track the dividends approved by companies, with the assumption dividends are reinvested in stock.
Thus, the BET-TR index will more accurately gauge the performance of the market compared with the BET index, which reflects only the trend of stock.
“This index will augment the appeal of the local capital market and will convey a more precise image of the bourse’s performance,” said Lucian Anghel, BVB president.
In the past two years, BET index has added 45%, without taking into account the dividends paid by companies part of it. The contribution of dividends, namely a plus of around 7%, is added to the 45% increase. This yields a total return of 52% brought by the stock and dividends of companies part of BET. A banking deposit would have brought a return of around 9% in the past two years.
However, the BET-TR will be hard to beat by fund managers. The target of most managers is to get a return above that of BET index. Now that there is an index that includes dividends, outperforming this index will be even more difficult.
At present, the bourse has eight indices. Bourse indices are mainly watched by institutional investors that build their portfolios depending on the structure of these benchmarks.
Besides completing the index structure, BVB has taken other steps to increase the liquidity and visibility of the local capital market, such as extending the trading session, slashing fees.
(English version by Catalina Apostoiu)