BVB up in the first half of the year; BET rises, budget deficit weighs

The main indices of the Bucharest Stock Exchange (BVB) recorded double-digit increases in the first half of the year, boosted by the result of the presidential elections on May 18, which confirmed the country's pro-European trajectory for the coming years.

The BET index, of the twenty most liquid stocks on the BVB, had an advance of 12%, to 18,736 points, while the BET-BK index, the benchmark for the return of equity investment funds, appreciated by 12.4%, to 3,528 points.

On the other hand, in economic terms, Romania is facing a high budget deficit, of 7.5% of GDP in the first quarter of this year, the largest in the European Union, according to Eurostat. Our country has agreed with the Commission a seven-year fiscal plan to reduce the deficit below 3% by 2030-2031, and the new government has already adopted a first package of measures that, in the short term, may have an inflationary impact and slow economic growth.

• International stock markets - under the influence of the Trump administration's trade policies

Stock markets in the United States and Europe were influenced in the first half of the year, mainly, by the trade policies of the Trump administration. In April, the American president announced a large set of customs tariffs on imports into the United States from almost all countries of the world, starting from a basic tax of 10%. The announcement, which brought the specter of a global trade war and the prospect of an economic recession, caused a severe fall in stock markets around the world, but later Trump decided to temporarily suspend the application of the tariffs for negotiations, an element with a positive impact on the markets.

The American president also had an oscillating attitude on the political level. Initially, Trump seemed to be getting closer to Russian President Vladimir Putin and gradually distancing himself from Europe and even NATO, a position that has since changed to some extent. However, the architecture of the European security structure seems to be at the beginning of a process of reconfiguration, given that there are signals that the American military presence in Europe will decrease, and the countries that are part of NATO have agreed to a gradual increase in defense spending.

In this context, the DAX index of the Frankfurt stock exchange had an appreciation of 20.1%, in the first half of the year, Germany being one of the pillars of European armament. In London, the FTSE100 index had an increase of 7.2%, while the STOXX 600 index appreciated by 6.6%, in a period in which the European Central Bank operated four interest rate cuts.

In the United States, the S&P 500 index appreciated by 5.5%, while the Dow Jones Industrial Average index had an advance of 3.6%. The Nasdaq Composite index, of companies operating in knowledge-intensive fields, increased by 5.5%, without the Federal Reserve reducing interest rates.

• Tax hikes and dividend payments

At the Bucharest Stock Exchange, after the election of the Romanian president for the next five years, investors' attention was captured by negotiations on the formation of a new government and the measures proposed to reduce the budget deficit.

Among the measures with a direct or indirect impact on companies, investors and the capital market as a whole, are the increase in excise duties on fuel, the increase in value added tax, the increase in dividend tax from 10% to 16% or the additional taxation of bank turnover. Companies presented their results obtained in the fourth quarter of last year and the first quarter of this year, as well as the dividend proposals, most of which were paid by mid-year.

• Transelectrica, Transgaz and Purcari - the highest returns in BET

Transelectrica shares appreciated by 51.2% in the first half of the year, in the context of reporting excellent financial results by the company, namely a new high in annual net profit in 2024 and a 52% increase in profitability in the first quarter of this year, primarily due to higher tariffs approved by ANRE. The issuer, which falls into the utilities category - a defensive sector, a refuge in times of economic uncertainty - holds a monopoly on the transmission of electricity in our country and may indirectly benefit from the liberalization of the energy market.

Transgaz shares had a total return of 50.4%, most of it coming from the appreciation of the share price, given that the company obtained in 2024 the highest profit in the last six years, while in the first quarter profitability doubled, in the context of the increase in transport tariffs.

Shares of wine producer Purcari Wineries had an increase of 40.3%, amid the announcement that the Polish group Maspex wants to take control of the company in the Republic of Moldova through a public offering taking place between July 16 and 30. The purchases are made at a price of 21 lei per share, significantly above the quotation of 14.12 lei on the day before the announcement of the offer, which also includes sales of shares held by founder Victor Bostan.

• Dividends at OMV Petrom, Hidroelectrica and Nuclearelectrica

OMV Petrom shares had a total return of 11.8%, in a volatile period for the oil price, which depreciated by about 11% in the first half of the year, the company's share price being supported by the dividend distribution with a yield of over 5% and the prospect of a new allocation in the second half of the year. Romgaz shares, OMV Petrom's partner in the Neptun Deep project for which production is estimated to start in 2027, had a strong price increase of 36.4% in the first half of the year, without obvious specific reasons.

Shares of the electricity producer and supplier Hidroelectrica evolved in a lateral movement, but the company distributed almost all of its profit as dividends, which brought investors a total return of 7%. Nuclearelectrica shares were also in a consolidation, and with dividends, the yield on the shares of the Cernavoda power plant operator amounted to 5.5% in the first half of the year.

The shares of the energy supplier and distributor Electrica recorded a total yield of 12.6%, most of which came from the appreciation of the quotation, given that the company's profitability increased by 53% in the first quarter, due to the performance of the distribution segment, while the liberalization of the energy market, starting with July 1, may improve the company's results by increasing revenues and profit margins.

• The performance of banking stocks on the BVB, below the European average

Banking stocks have performed inferiorly compared to the evolution of the sector at the European level, given that, under the impetus of the prospects of massive spending on infrastructure and armaments, the Euro Stoxx Banks index has marked an advance of 37.6%, in the first six months of this year.

Banca Transilvania shares, an institution that carried out a capital increase operation with the allocation of free securities, had a total return of 21.5%, composed of capital appreciation and dividends, while the return on BRD-Groupe Societe Generale securities amounted to 10.3%, The fiscal measures in the government program provide that banks with large market shares will pay a 4% tax on turnover starting July 1, compared to the current 2%, which may lead to an increase in commissions and interest on loans granted.

• Aquila, Digi and MedLife Shares Up

Shares in consumer goods distributor Aquila returned 23.4% in the first half of the year, supported by pension fund buyouts, including an accelerated placement in which the founders sold 8% of the company.

Shares in Digi Communications returned 18.3% in the first half of the year, while shares in MedLife rose 15.5% excluding dividends, with the healthcare provider pursuing an acquisition-based growth strategy that excludes allocating money to investors. Shares in drugmaker Antibiotice Iaşi fell 5.1%, more of a correction after last year's sharp rise. Shares in construction materials producer TeraPlast fell 4.2% in the first six months of the year, but the stock has recently rebounded, driven by a significant improvement in financial results.

• Trading discounts ranging from 73% for Lion Capital to 55% for Longshield Investments

The BET-FI index, of former SIFs plus Fondul Proprietatea, fell by 1.9% in the first half of the year, the largest decline among the Bucharest Stock Exchange baskets, mainly due to the depreciation of Lion Capital and Longshield Investment Group.

FP securities had a total return of 26.1%, given both the appreciation of the quotation and the consistent dividend distributed by the issuer. The evolution shows that the selling pressure exerted by pension funds last year has faded, the increase in the quotation being also supported by the issuer's share buyback program. The fund management is in the process of selecting a new administrator, with the Board of Representatives recommending the ROCA FP consortium as the preferred candidate for this position. The option is criticized by a group of shareholders, who are demanding details about how the selection and re-evaluation of the offers received were made.

The former SIFs have fallen off the radar of pension funds and other institutional investors, they have no active retail investors, and the Lion Capital group, Longshield Investments Group and Infinity Capital Investments do not distribute dividends, a context in which Lion shares fell by 7.4% in the first half of the year, while Longshield shares depreciated by 14.8%.

The Bucharest Court has forced the former SIF Banat-Crişana to give up its current commercial name, Lion Capital, following a dispute initiated in the spring of last year by the London-based company Lion Capital LLP, but the decision is not final. At the end of June, the former SIFs were trading at discounts between market price and Net Asset Value (NAV) ranging from 73% for Lion Capital to 55% for Longshield Investment. For FP, the discount was 48%, above the administrator Franklin Templeton's target of below 15%.

• Three ETFs listed on BVB

The Ministry of Finance began issuing Fidelis government bonds to the public on a monthly basis starting this year, with the total amount raised in the first half of the year reaching 10.6 billion lei, through five issues denominated in lei and euros, including tranches dedicated to blood donors.

Three ETFs were listed in the first half of the year on the Bucharest Stock Exchange. The investment manager InterCapital Asset Management from Croatia came up with an ETF that tracks the main index of the Slovenian capital market - SBITOP - which reflects the evolution of the nine most traded companies on the Ljubljana Stock Exchange. The first ETF that tracks the performance of the BET-EF index, Globinvest Energy Financials ETF, was listed on BVB in the spring. The fund reflects the evolution of companies in our country present on the Regulated Market, which are representative of the energy, utilities and financial sectors. SAI Broker - the investment management company of BRK Financial Group - has listed another ETF, called ETF BET BRK, which aims to replicate the evolution of the BET index.

Green Tech International, a group that operates geothermal wells and a platform for geothermal energy solutions, debuted on the BVB, after an IPO carried out in December last year. In the bond area, the Bucharest City Hall listed a new bond issue on the Regulated Market of the Bucharest Stock Exchange, for a total value of 555.1 million lei, while Autonom Services listed a new debt issue, for a value of 30 million euros.

Norofert, OMRO IFN, Mikro Kapital, Stanley Capital and Teilor Holding listed, in the first half of the year, bond issues with values of seven million lei, 1.56 million euros, two million euros, 14.8 million euros and 22 million lei, on the BVB Multilateral Trading System.

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