From 1999 until the end of last year stock exchange shares fetched a total real return of 1,680%, shows the TRX (Total Return Index) calculated by Intercapital Invest, and index that includes dividend gains brought by stock exchange shares and is adjusted for inflation in order to show the real return obtained by investors.
In other words, if someone had invested 100 lei in late 1999 or early 2000 in the TRX index, they would have in theory obtained a return of RON1,680 by the end of 2012. But the gain is only theoretical because so is the TRX index and if someone had wanted to replicate its structure, they would have needed more money.
The index includes all stock exchange shares and is weighted for capitalization, but a company cannot make up more than 10% of the index.
“The TRX index offers a clearer image as to investors’ gains. This is an average measure of the stock exchange performance, which has its advantages in that it takes into consideration dividends, with investors being interested in the total returns and in the capital increases through free shares or through shares at better prices than the market price, while yields are adjusted for inflation. The index can only reflect what has happened on the stock exchange in the past few years, i.e. an indecisive trend. Yields are not spectacular,” says Razvan Pasol, president of brokerage Intercapital Invest.
Last year the stock exchange brought total gains of 19% dividends included. If adjusted for the 3.3% annual inflation, the real return amounted to 15.88%. Whoever invested money based on the structure of the index at the end of 1999 and sold at the end of last year would have multiplied their money 17-fold, allowing for inflation, as this was one of the best periods in the history of the Bucharest stock exchange. The average annual yield during this period was 22.6%. However, if someone had been inspired enough to sell earlier, at the 2007 highs, they would have multiplied their money as much as 24 times.
On the other hand, a recent ZF analysis has shown that between 1999 and 2011 returns on bank deposits barely covered inflation, with the real average gain being close to zero.
The only investors who would not have obtained high returns on the stock exchange are those who bought shares at the end of 2007, when the stock exchange reached its highs, with the portfolios still recording losses of about 28% at the end of 2012. The loss is however smaller than that of the BET index, which between December 31st 2007 and December 31st 2012 declined 48%. This has to do with the fact that in the past few years investors collected significant dividends from companies, which compensated for the declines recorded by the shares in 2008. For instance in 2011, when the BET index fell 17.7%, the TRX index lost only 2%, with dividend gains almost completely offsetting the share declines.
(English version by Daniela Stoican)