The major stock exchange declines in August and September offered investors the opportunity to buy shares of major companies at very affordable prices. The recovery of the last few weeks has already amounted to gains for those who were brave enough to buy shares early this month.
From the lows reached on October 4, the main BET index gained 11.3%, while the BET-FI index, which tracks SIF regional investment funds and Fondul Proprietatea (FP.RO), rebounded 10%. The shares of some of the largest local companies, such as Petrom (SNP.RO), Transgaz (TNG.RO) and Banca Transilvania (TLV.RO) have gained 15% during this period, i.e. twice the yearly banking interest.
The SIFs also recorded significant rises, especially on Thursday, after state presidents in the euro zone decided to erase half of Greece’s debt to private investors, calming the markets, at least for now. Analysts are generally skeptical that this measure will be able to solve the underlying problem of indebtedness of European countries.
However, some of them retain their optimism and see a positive scenario for Romania and for the Bucharest capital market.
“It is important that the cut was made, and the response of the stock exchanges was an emotional one, as has so often been the case in the last few months. I think now markets will focus on the positive factor, but the underlying problem remains – countries with high debts and large debt services will spend less and record slower economic growth or could even temporarily step back into recession,” explains Caruntu.
He does not, however, believe that a pessimistic basic scenario will come true and says at present there are certain windows of opportunity on equity markets that can be capitalized on.
“Despite all the downsides of the low visibility and liquidity of BVB (the Bucharest bourse), I think Romania’s country risk profile which has improved in 2011, as well as the financial results reported so far for 2011 by BVB companies would justify exposure to shares (especially FP shares) at current prices,” says Caruntu.
“The current valuation of BVB companies is an attractive one, at a PER of around 10 calculated based on net 2010 profits. These are reasonable values especially given the 2011 financial results and considering that BVB companies are currently valued at less than the equity capitals of listed companies (P/BV of 0.9). In addition, for most major listed companies, the level of the debt service is sustainable when considered against operating profitability, which is very important for their long-term valuation on the BVB,” Caruntu adds.
He believes in the case of a few important BVB companies the dividend yield estimated for 2011 will be very attractive (over 6-7% for Fondul Proprietatea, the SIFs, Petrom, Transelectrica, while for Transgaz it could be over 10% and believes the current BVB prices should attract the attention of investor, especially of those investing long term (over at least one year).
(English version by Daniela Stoican)