The step will change a pattern on the stock market, as indices will no longer go up only in the first part of the year fueled by dividend expectations but will see a uniform trend throughout the year.
The law allowing quarterly payment of dividends will also lead to a change in the behavior of some investors, who will move from being speculators to a longer-term strategy, chief investment officers of four mutual funds with about 10 billion lei (some EUR2.2 billion) assets think.
“This step may lead to the modification of a pattern of the Romanian stock market. The market has been performing rather well in the first few months of the year until May over the last few years, when investors would trade expecting dividends,” Alexandru Combei, chief investment officer of BRD AM, a manager of mutual funds with RON2.9 billion in assets, at a conference at the Bucharest Stock Exchange on Wednesday.
The main index of the Bucharest Stock Exchange, BET, rose 12% in the first quarter of 2018, fueld by a generous dividend policy among issuers, besides the improved financial results and the government request for all state-run companies to allocate almost their entire profit to dividends. The index was only up 4.3% in late June, as a result of political uncertainty and some portfolio rebalancing.
“Investor behavior may change, too, because of the new law. They will most likely become long-term investors instead of speculating the moment, like they did at the beginning of the year, only to sell in June or July. They will most likely keep their investments long-term,” says Alexandru Ilisie, chief investment officer of OTP AM, a manager with RON620 million assets.
(English version by Loredana Fratila-Cristescu)