The volatility that engulfed international capital markets at the start of the year continued throughout the first half of the year, by the end of which most equity indices were in negative territory. The anxiety of international investors increased 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 fell by 3.61% in the case of BET and BET-TR, an index that also includes dividends. This fall is in line with the evolution of the indices in the developed markets: -3.14% for the American S&P500 and -3.36% for the European STOXX600 indices. Subsequently, until the end of the first semester, the Romanian capital market decoupled from this downward trend. At the end of June, the Romanian capital market registered a rise of 0.8%, through the prism of the BET-TR index, and thus fully recovered the declines caused by the war in Ukraine. In comparison, the total return variants of the S&P500 or STOXX600 indexes fell by 20%, respectively by 14.6% at the end of the first 6 months. International indices of the 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 malfunctions as well as fears of a possible recession in developed markets are still factors that can significantly influence activity in the capital markets. In such a context, the capitalization of Romanian companies remained at the level recorded at the end of last year: 141 billion RON or 28.5 billion EUR.
“Romania has proven to be a center of stability in the region. Capital follows opportunities where they present themselves and the capital market in Romania has demonstrated its appeal to local and international investors. This fact is reinforced by the continuation of the upward trend in 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 of the first 6 months show us that investors who trusted Romania had upside potential. Opportunities and threats are always present on the 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 is better positioned 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 moment. and this picture 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 investment activity was reduced. We were also able to observe these phenomena on the Bucharest Stock Exchange, but we found that the Romanian capital market reacted with maturity and that 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. One of the characteristics of the capital market is to be an efficient market, and supply and demand correct any deviations that occur, but the magnitude and frequency of these adjustments cannot be predicted. This is why, for Romanians who wish to invest their savings in stocks and bonds listed on the local stock exchange, investing on a recurring basis, diversifying asset classes and adopting a long-term investment perspective are key elements. which can produce very good results with minimal effort,” said Adrian Tanase, CEO of the Bucharest Stock Exchange.
BVB’s investment activity intensified in the first quarter only to slow in April and May in terms of average daily trading values. For example, in the equities segment for equities listed on the BVB regulated market, January had the highest average daily trading value of more than RON 100 million, while April had the highest daily value lowest average, 27 million RON. Overall, during the first half of the year, investment activity was robust on BVB, with an average daily value of over RON 60 million for the equity segment. Taking into account all types of financial instruments, the same indicator shows a level of 109 million RON (22 million EUR), an increase of 60% compared to the first 6 months of the previous year. The total market value of all types of financial instruments exceeded RON 13.5 billion (EUR 2.73 billion) in the first half of this year. Investors operating on BVB became much more active in January-June this year and entered 56.8% more sell-buy orders than in the same period last year. Thus, at the level of the first six months of the year, more than 824,000 transactions were carried out.
Romania has become increasingly visible internationally and has been present since June 20e, with 12 companies in the Russell FTSE Emerging Markets Index. 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.