Abstract
The last trading week reflected the tension before the expected decision of the Fed to cut interest rate. The rate cut actually came and was theoretically supported by the necessity to attenuate the risk of a prolonged recession or the need to bring liquidity to affected credit markets, ignoring however the threat posed by inflation. In fact, Fed’s decision aimed to psychologically influence markets, as there’s only a hypothetical chance that such rushed measure could actually have structural benefits only few days after the previous cut. Fed’s move suggests they are committed to other rate cuts if necessary in order to address looming recession, but they still monitor the evolution of inflation. Actually Fed was compelled to intervene in order to boost investor’s confidence in capital markets and thus stop the last from decline, but still kept the threat of inflation in handy in case rate cuts proves too aggressive. This frail balance that Fed’s and American governments intends to create at this level of prices (for credits, stocks) is similar to that maintained in the previous year, an only apparent equilibrium which masked an increasing sub-prime credit crisis. The same apparent stability is needed to correct the ongoing crisis which could last at least through next spring, meanwhile reversions for the upside depends on Fed’s ability to project an comforting image and are to be interrupted by cold showers coming from macro readings and corporate write-offs.
What is remarkable about the local Romanian capital market isthe relatively attractive level of prices for the most liquid issuers which were more affected by imported investor habits. Also is good to notice that these company are not directly affected by the macro crisis and that they continue to produce value, though this is in some extent eroded by relative depreciation (hard to diversify) of purchasing power and higher volatility of the exchange rate (in this context, the perspective for a downgrading of country’s rating reflects an increased risk that characterizes an accelerated growth and increased level of structural investments which we should acknowledge and accept). So there are fewer chances that these issuers are forced to report losses of the scale of those reported by corporations and especially by financially globalized firms, so that mimicked corrections on BSE won’t have the same fundamental justifications and are more likely to be reversed themselves. In conclusion, we expect still to see higher volatility in the following months, but we notice lower and relatively attractive prices on liquid assets listed on BSE which recommend themselves for accumulation (if we don’t bet however on a prolonged recession – still improbable in our opinion, in which case we should turn our attention on assets like gold which actually go beyond the limits of this writing).
Last week
Last week BET and BET-C lost another 5.33 and 5.65 percent, respectively, while BET-FI went down 4.69%. The average trading volume lost 53% to 32.7 millions daily, while the market capitalization lost a huge 6.7% chunk to 69.4 billion lei.
BVB indices
| indices | Change | Jan 25, 2008 | Feb 01, 2008 |
| BET | -5.33% | 7915.81 | 7493.53 |
| BET-C | -5.65% | 5472.58 | 5163.47 |
| BET-FI | -4.69% | 65330.12 | 62264.3 |
BET (chart)
Top price gain
Zimtub Zimnicea had the highest price gain last week (in fact on Friday when it gained the whole 15 percent) on low trading volume. Socep also advanced 13.82 percent due to significant transactions however, which cumulated to 1.39 percent of the total numbers of shares. Mecanica Ceahlaul also obtained the performance of a 6% price gain on adverse general market conditions; however the reason was the very high volatility combined with low trading volume for the five days in question.
TOP 5 - PRICE GAINERS [RON]
| Symbol | Change | Jan 25, 2008 | Feb 01, 2008 |
| ZIM | 15.00% | 3 | 3.45 |
| SOCP | 13.82% | 0.246 | 0.28 |
| MECF | 6.00% | 0.5 | 0.53 |
| PEI | 3.06% | 62.1 | 64 |
| UCM | 2.78% | 0.36 | 0.37 |
SOCP (chart)
Top price loss
Elecontract Botosani had themost severe price loss (-12%) last week, but the correction again came on low trading volume and apparently no significant news. Mechel Tragoviste makes for the top losses with -10.34% after being the top gainer last week – as one would have expected, each time on very low trading volume. A significant impact however – especially on market’s capitalization, was brought by Petrom (-10.3%), Oltchim (-10.28%) and Transelectrica’s (-7.83%) extreme losses. As BRD GSG also qualified second in top losses for this year and taking into account the SIF’s evolution we have a dreadful clue about the extent of losses those bluechip fans incurred last month.
TOP 5 - PRICE LOSERS [RON]
| Symbol | Change | Jan 25, 2008 | Feb 01, 2008 |
| ECT | -12.00% | 0.1 | 0.088 |
| COS | -10.34% | 7.25 | 6.5 |
| SNP | -10.30% | 0.427 | 0.383 |
| OLT | -10.28% | 1.07 | 0.96 |
| TEL | -7.83% | 33.2 | 30.6 |
SNP (chart)
Top volume
Banca Transilvania had the largest trading volume last week following the report of its financial which showed healthy increase even in the absence of special items. The SIFs and BRD complete the trading volume top, while an unusual trading volume was spotted with Socep shares.
TOP 5 - TOTAL VOLUME [RON]
| Symbol | Volume |
| TLV | 26,893,462 |
| SIF5 | 18,700,035 |
| BRD | 17,938,289 |
| SIF2 | 16,338,534 |
| SIF4 | 15,031,022 |
TOP 5 - VOLUME (% of subscribed capital)
| Symbol | Volume / Number of Shares |
| SOCP | 1.39% |
| SIF2 | 1.12% |
| SIF4 | 1.00% |
| BRK | 0.94% |
| SIF5 | 0.89% |
This year, up until now
Since the beginning of the year BET and BET-C went down 23.73 and 22.53 percent, respectively, while BET-FI is 20.85% 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 Siretul, SIF Moldova, SIF Oltenia broker Cluj and SIF Muntenia had the largest proportion in the companies’ capital.
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Copyright: 2006 SSIF Confident Invest Bucuresti SA. All rights reserved.
For further Information please contact Confident Invest, 7 Nerva Traian Str., 031042 Bucharest, Romania
Phone: +40 21 320 21 02, fax: +40 21 320 21 03, e-mail: research@confidentinvest.ro, web site: http://www.confidentinvest.ro
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Weekly Update Feb 02 2008.pdf, 76 Kb
