FINANCIAL APRILStrong rises for indices, after two months of heavy drops

Andrei Iacomi (Translated by Cosmin Ghidoveanu)
English Section /

Strong rises for indices, after two months of heavy drops

Rise of 4.63% for BET and of 6.75% in the case of BET-NG

After two months of major index drops on the BSE, caused by the waves of selloffs that mimicked those on the international stock markets, amid the negative medium-term economic outlooks following the measures imposed by the authorities to limit the spread of the Covid-19 pandemic, all Bucharest indices posted rises in April.

BSE main index BET, which includes the seventeen most traded stocks, with the exception of the SIFs, saw a rise of 4.63%, to 7978.64 points, whereas the BET-XT index, which tracks the top-25 liquid stocks, rose 4.55%, to 734.19 points.

In the United States, the Dow Jones Industrial Average rose 11.08%, whereas the S&P 500 rose 12.68%, and the Nasdaq Composite rose 15.45%, the first monthly rises of the American benchmarks this year.

"It seems that investors are betting on the fact that the viral pandemic which has devastated the job market, causing about 30 million Americans to become unemployed, which will probably take the unemployment rate to the highest levels since the Great Depression (ed. note: 1929 - 1933), will probably disappear eventually", MarketWatch writes.

In Europe, the moves have been more tepid. STOXX 600 rose 6.24%, whereas DAX 30 of the Frankfurt stock exchange rose 9.32%, and for the FTSE 100 of the London Market, the rise amounted to 4.04%.

This is the context where BSE also saw rises, accompanied by the general shareholder meetings held by various companies, which approved this year's dividends.

"Even though the Covid-19 pandemic has significantly changed the dividend policy of many companies, we can think that 2020 remains an attractive year for investors, in terms of their proposals to shareholders", the latest report by brokerage firm Prime Transaction says.

Conpet - up 19%

With a rise of 19.09%, to 78.6 lei, shares of Conpet (COTE) posted the biggest rise in the BET index, in the month of April, keeping up the rally that took shape in the second half of Mara.

The oil and gas carrier will pay a dividend of 7.05231147 lei, out of last year's profit and from the carried forward earnings, or a gross yield of 8.97%, based on the last stock price for the month of April, the second highest dividend return from the BET index. In addition, Conpet is a utility company, a sector which is considered a defensive investment and usually favored by investors in times of economic recession.

Rally of the lows for MedLife, Alro and Sphera Franchise Group

Shares of MedLife (M), Alro Slatina (ALR) and Sphera Franchise Group (SFG) are the next stocks in the biggest risers chart of the BET index, for the month of April.

In all three cases, we had a rally off the lows, with no obvious fundamental data driving the rise for any of them, given that none of them has announced any dividend payments this year.

It should be noted that in all three cases, the rise happened over low volumes, significantly so compared to this year's median daily volumes, which shows a relatively low investor interest in those stocks in Marchs. Moreover, shares of all three companies have low turnovers, compared to those of the biggest most important issuers listed on the BVB, and thus are more likely to experience large price swings.

MedLife rose 18.93% in April, to 33.3 lei, Alro rose 18.92%, to 1.54 lei. Sphera Franchise Group rose 17.06%, to 14.75 lei.

10% dividend yield at Nuclearelectrica

Nuclearelectrica (SNN) is the only company from the BET index to pay out a dividend with a gross yield higher than 10% (1.65306302 lei). The SNN stock closed April at 15.7 lei, which puts the dividend yield at 10.53%.

Shares of the nuclear energy producer have posted the biggest rise in the BET index this year, as the SNN quotation has seen an upward trend since 2017, an evolution which occurred due to improving financial results and the dividends paid out at the request of its majority shareholder, the Romanian government.

In April this year, the price of SNN shares rose 13.6%.

BRD - Groupe Societe Generale, down 3.75%

With a 3.75% drop to 11.3 lei, shares of BRD - Groupe Societe Generale (BRD) are the biggest loser in the BET index in April.

In the meeting of April 23rd, the shareholders approved the proposal to allocate last year's entire profit of 1.528 billion lei, to the result carried forward, a request that was introduced on the agenda at the request of Societe Generale, which hold 60.17% of the issuer.

The decision comes as, at the end of March, the European Central Bank (ECB) advised Eurozone banks not to pay dividends and not to do stock buybacks during the Covid - 19 pandemic because. The National Bank of Romania (NBR) subsequently recommended that banks not pay dividends this year.

Ratings firm Moody's Investors Service recently reviewed the outlook of three Romanian banks, including BRD, and affirmed the "Baa1" ratings assigned for long-term local currency deposits and the "Baa3" ratings for long-term foreign currency deposits.

BET-NG, the index with the biggest rise

Shares of OMV Petrom (SNP), which hold the largest weight in the BET-NG index, and which reflect the evolution of the energy and utilities sector on the BSE, rose 10.34% in April, to 0.32 lei. The oil and gas maker will pay a dividend of 0.031 lei to shareholders, the equivalent of gross yield of 9.69%, compared to the last April price of the stock.

Aside from the rise of SNP, other issuers that have pulled the BET-NG index upwards in April are COTE, SNN and Transgaz (TGN), so that the index closed April at 619.49 points, up 6.75% compared to March, the biggest rise of all the indices of the BSE.

SIF Transilvania and SIF Oltenia, suspended from trading

At the end of April the BET-FI index was up 2.48%, to 40419.36 points. Two of its issuers had their stocks suspended: SIF Transilvania (SIF3) and SIF Oltenia (SIF5), following decisions made by the ASF.

In the case of the Braşov SIF, two reports about the decisions of the General Shareholder Meetings of April 28th have appeared, one published on the BSE and signed by Crinel Valer Andănuţ and Marius Adrian Moldovan, and another on the SIF3 website, signed by Mihai Fercală and Ştefan Szitas, both with the same quorum, but which present different decisions, due o the different abstentions count.

Still, both reports greenlit the dividend of 0.0355 lei, the equivalent of a gross yield of 11.3% over the last SIF3 price (April 22nd), of 0.314 lei. SIF3 doesn't currently have a directorate approved by the ASF.

Where the SIF of Craiova is concerned, on April 28th two parallel general shareholder meetings were held, with different quorums and contradictory decisions, as a number of investors present at the company's headquarters, including the group made up of SIF Banat-Crişana (SIF1) and SIF Muntenia (SIF4), failed to enter the building because they had already voted by mail. They, together with the representatives of several investment funds, held a separate meeting.

In the general shareholder meeting chaired by Tudor Ciurezu, the shareholders have approved a dividend of 0.1 lei, the equivalent of a gross yield of 4.73% over the last price of SIF5 of April 28th, (2.11 lei), but that proposal was rejected in another meeting.

SIF Moldova (SIF2) removed the 5% holding cap from its Articles of Incorporation, according to the quorum of the shareholders' vote of April 27th, and also approved the payout of a dividend of 0.06 lei, the equivalent of a gross yield of 4.6%.

At the end of last month, the SIFs were traded at NAVPS/price discounts between 25.55% for SIF2 and 60.07% for SIF4, whereas the Proprietatea Fund had a discount of 23.18%, above the goal sought by Franklin Templeton, the administrator of FP, of less than 15%.

We have entered the month of May, to which is attached one of the best known sayings in the investment sector: "Sell in May and go away!".

The Wall Street saying relies on the historical model of the price swing of American stocks which, have on average posted weaker results between the beginning of May and the end of October, compared to the other six months of the year.

Still, considering that investors are facing one of the most severe public health crisis in history, the model may not be confirmed this time, according to MarketWatch.

It remains to be seen how the stocks on the BSE will do this month, as most issuers will publish the first quarter results, and the restrictions imposed by the authorities will start loosening up in Romania, as well as in Europe and the United States.

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