Brokers, however, say that what is more important is going above the all-time high, which could be the start of a new phase in the development of the most liquid company on the stock market.
Fondul Proprietatea started the year in full gear on the stock market gaining 9%, which took it close to the last 12-month high. It overshot the RON0.6/share in the trading session on Wednesday after the first thirty minutes, a level it had not reached since March last year.
The reasons for the increase were the stock purchases of Elliott Associates and the good period for the stock market both in Romania and abroad.
Elliott Associates has been the most active investor in Fondul Proprietatea, and bought 50 million shares for RON30 million in January 22-29. The purchases were done through several brokerage firms and account for almost half of the Fondul Proprietatea volume traded during this period.
Large stakes were traded on Wednesday, as well, with 20 million shares changing hands in a single deal at RON0.6 per share.
“I’ve seen several purchases made in the past week because Elliott must be looking to buy a larger stake, which is not available for sale, so it is buying smaller stakes,” said Ovidiu Fer, analyst with Czech-held brokerage firm Wood&Co.
The buying of shares by the largest shareholder of the fund is a good sign for the market, believes Mihai Caruntu, head of the capital market research department with Romania’s largest bank, BCR.
“Foreign investors’ buying is a good sign. Elliott is a sophisticated investor and I think it has an exit scenario set when it makes a purchase. It is buying now because it believes it can make profit in the future. Several factors can help the shares up, but they are not yet active: the repurchase program currently stuck in court, the floatation of Romgaz, which might happen in the second half and Hidroelectrica’s exit from insolvency.”
Fondul Proprietatea shareholders approved the repurchase of up to 8%, but a minority shareholder went to court to block the move.
“Elliott has been actively buying because it sees growth potential in the fund shares. OMV Petrom (SNP.RO) shares are cheap, and the floatation of Romgaz and unfreezing of the repurchase program will help the fund’s shares up (…)” Ovidiu Fer added.
Elliott had 15% in Fondul Proprietatea at the end of last year and has invested more than one billion lei in its shares over the last two years.
Another reason for Elliott to buy is the dividends that Fondul Proprietatea will pay, which could be close to last year’s level of RON0.0385/share, or 6.4% of the current share price. The fund will announce the proposed dividends when it publishes preliminary results on February 14.
Fondul Proprietatea shares overshot the RON0.6 mark after having traded at about RON0.54 for a while. It reached the all-time high of RON0.6495 in its first trading day on the stock market on January 25, 2011.
“What’s more important than the fund going over the RON0.6 mark is whether it can stay there for a longer while. Once a certain price is exceeded, investors are tempted to sell and the stock price reverts to the previous level,” said Marcel Murgoci, trading manager with brokerage firm Estinvest.
The RON0.6 mark is not that important, believes Mihai Chisu, broker with Swiss Capital.
“The maximum price in the first day of trading is much more important. If the fund shares exceed that we can expect a new phase in the performance of the shares.”
Even though they have gone up 9% so far, Fondul Proprietatea shares remain relatively cheap compared with the assets in its portfolio and the regional investment fund (SIF) shares. They are now trading at a 47% discount to net asset value. The five SIF on the other hand have driven their discount down to 30% to 40%.
(English version by Loredana Fratila-Cristescu)