Abstract
US markets displayed a strong ascendant tendency last week, and Dow Jones attained a nice resistance level, for the joy of chartists everywhere. The bold move determined some European analysts to declare unjustified the move (looking for an end to the blind rally in financials - www.saxobank.com ), especially as UBS`s announce was too fresh to be ignored. The experts` stupefaction is shared by fellow Americans as well, as they look at fundamentals an see no connection whatsoever: slashed jobs, spiking unemployment, and a plethora of affirmative responses to the most useless question of whether there really is recession in US or not. Someone in this dispute has to be wrong (or at least more than the others), and I suspect the exponents of the general accepted truth to be those: analysts, economic journalists, and in general, all those who form and diffuses an opinion that gets to be embraced by readers and small and medium investors altogether. Of course they are still right in what concerns the fundamentals - those numbers look bad, and they will continue to look bad throughout the year, with or without recession. However, this is not enough to expect markets to fall.
In order to succeed, a strategy that aims to float over such great macro imbalances has to look much further in time. There are more and more those who accept the difficult situation that US economy and financial markets are passing through. When their numbers will become critic, some will realize nothing wrong could surprise the majority. They definitely are not blind, just maybe impatient some time, as it happened, I think, last week.
As our experience of dealing with such crises is limited, we prefer to maintain our initial time horizon, of about 6 months when sustainable gains are improbable. Until than monitoring consensus might pay off. A proof that the US Government`s strategy to bring back confidence will work, is already a late but reliable entering signal. Some took Lehman`s ability to gather funds as such a sign. It`s probably to early for that, there will definitely be some other impressive writedowns in the nearby future, and they will not bring cheers. We will have to further discuss the ways this evolution will influence BSE beyond short term correlations.
Last week
Last week BET and BET-C gained 3.15 and 2.64 percent, respectively, while BET-FI went up 2.04%. The average trading volume lost 28% to 22.19 million lei daily, while the market capitalization went up 2.67 percent to 120.6 billion lei.
| BVB indices | |||
| indices | Change | Mar 28, 2008 | Apr 04, 2008 |
| BET | 3.15% | 6,964.38 | 7,183.46 |
| BET-C | 1.91% | 5,002.20 | 5,097.68 |
| BET-FI | 2.04% | 53,779.78 | 54,875.15 |
BET (chart)
The largest advance of capitalization inabsolute terms belongs to BRD with a 6.9 percent increase (975.6 millions lei). Banca Transilvania gained 2.06 percent last week, and together with BRD and other two banks was involved in negotiations for selling each of their 25% stakes of Asiban to a French insurance group. BRD and Banca Transilvania obtained 917 (+40%) and 340 (+183%) millions lei in 2007, according to their preliminary reports (RAS). However, TLV`s result was boosted by selling of its own insurance business this autumn to that same insurer from France. The operational activity showed a decline for BRD and a small increase for TLV for their lending activity (the statistic was derived from NBR`s reports on credit evolution in 2007 and the companies` reports), while they both consolidated market share for deposits drawn, with BRD having a slightly higher success reflecting an apparently more conservative overall approach.
Although local banks were not directly affectedby liquidity crisis manifested mainly in US, the maintaining of this relatively high level of profitability is questionable. A first cause is the natural deterioration of growth potential in Romania as credit capacity got closer of a maturity phase. Secondly, the access to foreign credit was highly diminished due to international crisis, especially for BRD who suddenly lost at least partially the strong advantage of having GSG as shareholder after the fraud scandal in France.
Also, NBR` s measures to fight inflation, like hiking minimum reserves rates or imposing special provisions for credits, will definitely diminish efficiency for the funds obtained in 2008.
However, the main discussion point for investors is notwhether local banks are overpriced, but whether they are still overpriced after the strong corrections they suffered in the last months. We have our own opinion on this matter.
Socep Constanta had the largest price gain last week of 20%, as the insiders reported significant acquisitions throughout the week. Specifically in Monday SOCP shares climbed 13.21 percent as Celco SA acquired about 93% of the traded volume that day, according to reports submitted to BSE. Actually, since the beginning of the year more significant shareholders acquired SOCP shares.
According to Socep`s preliminary results, the company a 60 percent higher profit, while for the end of 2008 they intend to pull out another, more modest, 7.3 percent increase of gross result. Also the GS meeting approved a surprising 0.0147 lei/share dividend (about 4.4% of the closing price on Friday) composed of current net result available and other reserves not distributed in the previous years. The company actually pays off as dividend the equivalent of 92 percent of its net result in 2007.
| TOP 5 - PRICE GAINERS [RON] | |||
| Symbol | Change | Mar 28, 2008 | Apr 04, 2008 |
| SOCP | 20.0000% | 0.2800 | 0.3360 |
| ECT | 18.1818% | 0.0550 | 0.0650 |
| CBC | 12.6667% | 15.0000 | 16.9000 |
| MEF | 12.6316% | 1.9000 | 2.1400 |
| IMP | 10.2804% | 0.2140 | 0.2360 |
SOCP (chart)
Apparently Aerostar had the steepest decline last week. However the fall was merely a technical correction following a decrease of the face value of the shares. In fact ARS might qualify for BSE`s best performers for the period starting January and until now.
Financial companies - banks and investment firms, were most traded last week. The trades we`ve already discussed about pushed SOCP on the first place in a top of percent-of-capital traded volume. Also significant trading volume could be noticed with Carbochim and broker stock.
| TOP 5 - PRICE LOSERS [RON] | |||
| Symbol | Change | Mar 28, 2008 | Apr 04, 2008 |
| ARS | -89.0909% | 13.2000 | Януари.00 |
| ASA | -12.6126% | 0.5550 | 0.4850 |
| AMO | -5.2991% | 0.0585 | 0.0554 |
| ENP | -2.9126% | 5.1500 | 5.0000 |
| COS | -2.5862% | 5.8000 | Май.00 |
ARS (chart)
| TOP 5 - TOTAL VOLUME [RON] | |
| Symbol | Volume |
| BRD | 15,877,311 |
| SIF2 | 15,136,930 |
| SIF5 | 13,601,688 |
| SIF4 | 8,745,948 |
| TLV | 7,092,966 |
| TOP 5 - VOLUME (% of subscribed capital) | |
| Symbol | Volume / Number of Shares |
| SOCP | 2.50% |
| SIF2 | 1.21% |
| CBC | 0.85% |
| BRK | 0.85% |
| ECT | 0.81% |
This year up until now...
Since the beginning of the year BET and BET-C lost 26.89 and 23.52 percent, respectively, while BET-FI is 30.25 percent lower than its level on 21st of December 2007. The SIFs, Banca Transilvania and BRD had the highest trading volume for this period. The trades with SIF Moldova, SIF Oltenia, Siretul Pascani, SIF Muntenia and broker Cluj had the largest proportion in the companies`s capital.
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Weekly Update April 4 2008.pdf, 49 Kb
