Records at BVB; tax measures appreciated internationally

The Bucharest Stock Exchange (BVB) indices reached new historical records last month, following developments that were clearly superior to the major international markets, which suggests that the fiscal-budgetary correction measures announced by the Government are well received by investors, a fact also illustrated by the positive reaction of the rating agencies and the European Commission.

The BET index, of the twenty most liquid securities of our market, had an advance of 7.8%, exceeding the threshold of 20,000 points for the first time in history, while the BET-BK index, the benchmark of return of equity investment funds, had an advance of 9%, up to 3,847 points.

• US-EU trade deal; 15% tariffs on most EU goods plus energy imports and investment The United States and the

European Union have agreed on a trade deal that will impose 15% tariffs on most EU goods exported across the Atlantic, covering sectors such as autos, pharmaceuticals and semiconductors. The EU has also pledged to import $750 billion in US energy and invest around $600 billion over the next few years. The United States has also signed trade deals with some Asian countries, but had not reached a clear agreement with Beijing by the end of July.

The Federal Reserve has kept its benchmark interest rate at 4.25% to 4.5%, but markets and analysts expect one or two cuts this year, while most major US companies reported better-than-expected earnings in the last quarter.

In this context, the S&P 500 index rose 2.2% last month, the Dow Jones Industrial Average stagnated, while the Nasdaq Composite, of companies operating in knowledge-intensive fields, appreciated 3.7%.

On our side of the Atlantic, where European Central Bank officials have suggested that the cycle of interest rate cuts is nearing its end, while tariffs may reduce corporate profitability and the competitiveness of European exports in the United States, the Stoxx 600 index appreciated 0.9% last month. In Frankfurt, the DAX index rose 0.6%, while in London the FTSE 100 index appreciated 4.2%, given that the United Kingdom is not part of the European Union.

• International institutions see the first fiscal package of the Government as a "positive step”, but demand rapid and complete implementation

The European Commission has appreciated the first package of fiscal-budgetary measures undertaken by the Romanian Government, characterizing it as "an important and positive step” for achieving the objectives of the excessive deficit procedure, but has conveyed that the measures must be quickly and fully adopted and implemented, according to a press release from the Ministry of Finance.

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 fuels, the increase in VAT rates to 11% and 21%, the increase in dividend tax from 10% to 16% or the additional taxation of the turnover of banks, except for those with a very small market share.

Moody's rating agency reacted positively to the fiscal-budgetary measures undertaken by the Government, calling them "an important step" towards budget balancing, but warns that the full and efficient implementation of the program, as well as maintaining fiscal discipline, will be essential, given the scale of the planned consolidation. S&P Global Ratings confirmed Romania's long- and short-term debt ratings at "BBB minus/A-3', with a "negative" outlook, thus avoiding a downgrade to the "non-investment grade" category.

"We understand that the Government (of Romania) intends to adopt additional measures in the form of two reform packages in the coming months, which may lead to additional fiscal consolidation, even if to a lesser extent than the initiatives already legislated," say S&P Global Ratings analysts, according to Agerpres.

The second package of fiscal-budgetary reforms targets the public administration, state-owned companies and the tax system, aiming to reduce spending, improve services, modernize tax collection and combat inefficiency and evasion.

Overall, the measures announced by the executive are well received by the financial markets, as illustrated by the falling yields of Romanian government bonds with long maturities, compared to the situation six months ago. On the other hand, the increase in excise duties and VAT, along with the liberalization of the electricity market, will fuel inflation and slow economic growth in the short-medium term, a rather stagflationary scenario, which may affect BVB share prices.

• TeraPlast, Electrica and Transgaz - the biggest gains in BET

The share prices of all companies that make up the BET index recorded increases in June, a period that also marked the beginning of the reporting season for the second quarter, with most issuers set to come out on the ramp this month.

Shares of construction materials producer TeraPlast Bistriţa appreciated by 23.1% last month, the highest in the main market index, without obvious specific information to support its growth. The company returned to profitability after a period of losses, which severely affected the price of the issuer's securities, but the government's fiscal measures may adversely affect TeraPlast's business in the short and medium term.

Shares of energy supplier and distributor Electrica appreciated by 22% last month, during which the company sold green bonds through an offer that was massively oversubscribed. The issuer announced that, in addition to the Distribution Network Development Plan for the next ten years worth 6.9 billion lei, it estimates investments financed from non-reimbursable funds of 3.8 billion lei. Electrica had a very solid first half of the year from a financial point of view due to the performance of the distribution sector, and the liberalization of the energy market may improve the company's results by increasing revenues and profit margins.

Transgaz shares appreciated by 21.9% in July, a new stage in the upward trend that the natural gas transporter's shares have been on since the beginning of this year, reaching new historical highs. The results of the first quarter were excellent, on the background of higher volumes transported and more favorable regulated tariffs, a context that probably created high expectations for the results of the second quarter.

• Energy sector gains mixed; OMV Petrom reports Q2 revenue, profit declines

OMV Petrom shares rose 3.7% last month amid flat global oil prices. The oil and gas producer reported a 7% drop in sales revenue and a net profit of around 1 billion lei in the second quarter, 17% below the April-June 2024 period, mainly due to lower oil prices. The company's board said it will decide in the third quarter whether to propose a special dividend to shareholders this year. Romgaz shares, OMV Petrom's partner in the Neptun Deep project - which can supply up to 100 billion cubic meters of natural gas starting in 2027 - appreciated by 13.4%, with the company's price hitting new historical records, without any specific elements explaining the evolution.

Electricity producer and supplier Hidroelectrica celebrated two years since its listing on the BVB, in a month in which the company's share price continued to evolve in the consolidation it has been in for a year. In contrast, Nuclearelectrica shares appreciated by 11%, forming an upward price trend in the short term, while in the medium term the Cernavoda power plant operator's price is on a downward trend.

Energy transporter Transelectrica shares appreciated by 5.4%, an evolution that also includes the ex-dividend correction for the allocation with a yield of over 6%.

• Historical highs for Banca Transilvania, Digi Communications and MedLife shares

Credit institution shares have underperformed the European banking sector - reflected by the increase in the Euro Stoxx Banks index by about 9% in July - in a climate marked by the Government's decision to double the tax on banks' turnover from 2% to 4%. Even so, Banca Transilvania shares have set new historical records, with the credit institution distributing almost 19 free shares for every 100 held. On the other hand, BRD - Groupe Societe Generale shares have been in a sideways movement for a year and a half, in the face of financial results below investors' expectations. For the second quarter of the year, BRD reported a profit of 400.7 million lei, 14% more than in the same period of 2024.

The share prices of Digi Communications and MedLife, two of the few growth companies with international expansion on the BVB, appreciated by 16.5% and 16.1%, last month, with quotes marking new historical records.

The shares of drug manufacturer Antibiotice Iaşi appreciated by 10.3%, in a month in which the company announced its intention to develop a research and production center for critical drugs, a project worth 377 million lei for which it wants to use European funds.

Maspex Romania has taken control of Purcari Wineries, reaching a 72% ownership of the Moldovan wine producer following a voluntary public takeover offer. Among the sellers were Amboselt Universal - controlled by Purcari founder Victor Bostan - Firebird Avrora Advisors and Firebird Management, Fiera Capital and Dealbeta Investments Limited, according to reports from BVB.

• Trading discounts ranging from 71% for Lion Capital to 55% for Longshield Investments

The BET-FI index, made up of former SIFs plus Fondul Proprietatea (FP), rose 4.9% to 63,794 points last month, the lowest appreciation among the BVB baskets of shares.

FP shares advanced 14.9%, as the fund runs a buyback program, which supports the share price, and announced the submission to the ASF of the documentation related to a public offer for the acquisition of 120 million of its own shares, a quantity that was later reduced to 80 million.

The FP Board of Representatives is in the process of appointing a new administrator, and in the first phase it selected the partnership between IRE AIFM and Impetum Management, called ROCA FP, as the preferred candidate, but a group of shareholders is contesting the option. They requested the convening of a General Meeting to resume the selection process, under the condition that the proposed administrator has assets under management at least equal to the value of Fondul Proprietatea's assets. Another point requested by the shareholders concerns the approval of the distribution of dividends, worth 37.2 million lei, with scheduled payment in November.

Two funds, whose main investors are Lion Capital and Longshield Investment Group, have acquired 6.71% of the shares of the Bucharest Stock Exchange. FIA Star Value and FIA Multicapital Invest, funds managed by Star Asset Management, had reached holdings of 2.1% and 4.6% of the BVB, respectively, on July 29, following transactions carried out in the "deal" market, the seller not having been reported yet.

At the end of July, the former SIFs were trading at discounts between market price and Net Asset Value (NAV) ranging from 71% for Lion Capital to 55% for Longshield Investment. For FP, the discount was 41%, above the administrator Franklin Templeton's target of below 15%.

• Electrica and Banca Transilvania bond listings

The Ministry of Finance has raised 1.65 billion lei (681.3 million lei and 192 million euros respectively) from the population through the sixth issue of Fidelis government bonds. The lei-denominated bonds have interest rates ranging from 7.25% to 8.25% - in the case of blood donors - with maturities between one and six years, while the euro-denominated bonds have interest rates ranging from 3.4% to 6.3%, with maturities between two and seven years.

Banca Transilvania has listed a sustainable bond issue worth 1.5 billion lei, with the bonds maturing in 2032 and an annual interest rate of 8.875%. Energy supplier and distributor Electrica has listed its first bond issue on the BVB, marking the largest green, corporate and non-financial bond issue in the history of the Romanian capital market. The total value of the issue amounts to EUR 500 million, with a fixed annual interest rate of 4.375% and a maturity date of July 14, 2030.

OMRO, the lending company of fintech Filbo, has listed bonds worth 12.3 million lei on the BVB Multilateral Trading System, with a maturity date of 2023 and a variable interest rate calculated as the sum of the NBR reference interest rate and a fixed margin of 5.5%.

• Banca Transilvania, OMV Petrom and Hidroelectrica shares - in the top three in terms of turnover

The total value of transactions with securities listed on the Main Segment of the Bucharest Stock Exchange was about 3.2 billion lei in July, 9.2% below the level recorded in June. The average daily value of transfers fell by 21%, reaching 138.6 million lei, in the same reporting period.

With transactions worth 439 million lei, Banca Transilvania shares occupied the first position in the top of share turnover in July. In second place were OMV Petrom shares, with transfers totaling 145.5 million lei, the ranking being completed by Hidroelectrica, whose shares generated exchanges of 90.8 million lei.

At the end of July, the market value of all companies listed on the Main Segment of the Romanian capital market (including Erste Group Bank) was about 430 billion lei, 8.5% higher than the level recorded at the end of June, according to the monthly report published by BVB.

Read The first fiscal package, Bolojan's gift