The anxiety of international investors was accentuated in February and reached new heights following the outbreak of the armed conflict between Russia and Ukraine. At the end of February, the Romanian capital market went down by 3.61% in the case of BET and BET-TR, an index that also includes dividends.
This decline was in line with the evolution of the indices in the developed markets: -3.14% for US’s S&P500 and -3.36% for Europe’s STOXX600 indices. Subsequently, until the end of the first half, the Romanian capital market decoupled from this downward trend. At the end of June, the Romanian capital market returned an increase of 0.8%, through the lens of the BET-TR index, and thus fully recovered the decreases caused by the war in Ukraine. By comparison, the total return variants of the S&P500 or STOXX600 indices decreased by 20%, respectively 14.6% at the end of the first 6 months. The international indices of total return type such as FTSE Emerging Markets or MSCI Frontier Markets – indices in which Romania is also included – were in negative territory with -14.8%, respectively -20.5%.
Other external risks related to the evolution of the coronavirus pandemic, rising inflation, rising interest rates, rising energy prices, supply chain dysfunctions as well as fears of a possible recession in developed markets are still factors that can significantly influence the activity in capital markets. In such a context, the capitalization of Romanian companies remained at the level recorded at the end of 2021: RON141 billion or EUR28.5 billion.
“Romania has proven a pole of stability in the region. Capital follows the opportunities where they appear and the capital market in Romania has demonstrated its attractiveness among local and international investors. This fact is strengthened by the continuation of the upward trend of the listings of Romanian companies on the stock exchange and by the extension of Romania’s representation on the radar of international investors. The results for the first 6 months show us that the investors who trusted Romania had un upside potential. Opportunities and threats are always present in capital markets, which are currently going through a complicated context because there are multiple factors that are difficult to quantify in the short term. The fact that Romania has positioned itself better compared to other indices or other markets is not a guarantee for the future, but it is an image that captures the evolution of the market at a given time and this image is relevant for investors when deciding where to allocate capital”, said Radu Hanga, President of the Bucharest Stock Exchange.
“The first half of the year was intense for the international capital markets, not only for Romania. Strong episodes of volatility contrasted with sessions where the investment activity was reduced. We could also observe these phenomena on the Bucharest Stock Exchange, but we found that the Romanian capital market reacted maturely, and investors identified here opportunities to preserve or increase capital, which made Romania an attractive investment destination. We expect volatility to continue to be present in the second half of the year. One of the characteristics of the capital market is that it is an efficient market, and supply and demand correct the discrepancies that occur, but the amplitude and frequency of these adjustments cannot be predicted. That is why for Romanians who want to invest their savings in shares and bonds listed on the local stock exchange, investing recurrently, diversifying among asset classes, and adopting a long-term investment perspective are key elements that can produce very good results with a minimum of effort”, said Adrian Tanase, CEO of the Bucharest Stock Exchange.
The investment activity at the Bucharest Stock Exchange was heightened in the first quarter only to slow down in April and May when it comes to the daily average trading values. For example, in the equity segment for the shares listed on the Regulated Market of the Bucharest Stock Exchange, January saw the highest average daily trading value, of over RON100 million, while April saw the lowest average daily value, of RON27 million. Overall, during the first half of the year, the investment activity was robust at the Bucharest Stock Exchange, with an average daily value of over RON60 million for the equity segment.
Taking into account all types of financial instruments, the same indicator shows a level of RON109 million (EUR22 million), increasing by 60% compared to the first six months of the previous year. The total trading value of all types of financial instruments exceeded RON13.5 billion (EUR2.73 billion) in the first half of 2022. The investors operating at the Bucharest Stock Exchange became much more active in January-June 2022 and introduced 56.8% more sell-buy orders than in the same period last year. Thus, at the level of the first six months of 2022, more than 824,000 transactions were performed.
Romania has become increasingly visible internationally and has been present, since June 20, with 12 companies in the Russell FTSE index dedicated to emerging markets. The 12 companies are: Banca Transilvania, Nuclearelectrica, OMV Petrom, TeraPlast, One United Properties, MedLife, Transport Trade Services, Purcari Wineries, Conpet, IMPACT Developer & Contractor, Sphera Franchise Group, and Aquila.