market WRAP-UP
A rebound on Friday partly offset the drop of overall market levels last week. After 4 negative trading sessions in a row, positive news from the US Treasury and green colour of the European indices helped the domestic market to recover a bit during the last session for the week. SOFIX closed at 853.75 points (-11% WoW), after break a 52-weeks low. The other indices followed suit: BG40 suffered the most, closing at 206.86 points (-11.7%), BGTR30 lost 9.8% to 567.07 points, and BGREIT lost only 2.7%, to the level of 81.85 points. Based on the experience of the last week, we conclude that the market has grown “price insensitive” at moments -- the search for liquidity and the overall fear of an even wider global financial crisis impacted the Bulgarian market regardless of the performance of the local economy, the domestic companies and their respective fundamental valuations. We expect the Bulgarian market to continue to follow the sentiment of the world financial markets rather than the local drivers during the coming weeks. This could open the door for profitable longer-term investment opportunities - some of the local companies are still under significant sell pressure even though the hunt for liquidity has already pushed their prices far below their fair value.
news HIGHLIGHTS
- GDP real growth reached 7.1% YoY in H1 08 (vs. 6.5% YoY in H1 07). The H1 08 GDP amounted to BGN 29.4bn.
- HICP inflation slowed to 11.8% YoY in August, down 2.6% form the 14.4% YoY reported in July.
- Wage growth in Bulgaria spiked to 21.9% YoY in Q2 08, the third highest growth in the EU.
- Average household income rose 12.3% YoY in July 08 to BGN 720. Household expenses increased 7.8% YoY.
- Sofia real estate prices were reported up 9.4% YoY in H1 08, according to Raiffeisen Real Estate division.
- First Investment Bank [5F4] unconsolidated net profit for Jan – July 08 was reported up 16% YoY, to BGN 27m. Separately, Fitch affirmed the bank’s ratings, but lowered its outlook from stable to negative on concerns of costs of refinancing.
- Monbat [5MB], a battery producer, cut the price of its share buyback to BGN 10 per share, from BGN 11.24 previously.
- Lomsko Pivo [6L1] benefits from a new legislation approved by Parliament to reduce the excise duties for small breweries.
- Agria Group Holding [A72] announced an EUR 25m investment plan, focused on the construction of a plant for vegetable oil with an annual capacity of 100k tons.
- Some EUR 500m are to be invested in wind farms in north eastern Bulgaria by the end of 2009, said Velizar Kiryakov, chairman of the association of eco energy producers.
- Sigma Consulting, owner of 78% of Cigarette Factory Plovdiv BT [4CV], made a tender offer of BGN 36.60 per share.
- The prospectus of Medical Diagnostic Center Biocheck was approved. The company lists its 930.9k existing shares.
SOFIX/ BG40 (chart)
BGTR30/ BG REIT (chart)
| Change | SOFIX | BG40 | BGTR30 | BGREIT |
| 1-wk | -11.0% | -11.7% | -9.8% | -2.7% |
| 3-mo | -28.4% | -35.7% | -29.0% | -14.3% |
| YtD | -50.9% | -59.9% | -47.8% | -21.8% |
| 12-mo | -51.1% | -57.7% | -48.4% | -18.6% |
Top Gainers*
| M+S Hydraulic [5MH] | -0.9% |
| Industrial Holding Bulgaria [4ID] | -1.8% |
| Neochim [3NB] | -2.4% |
Top Losers *
| Bulgartabac Holding [57B] | -26.0% |
| EuroIns Insurance AD [5IC] | -22.6% |
| Sopharma [3JR] | -20.4% |
* from our list of selected stocks (see last page)
| Turnover statistics | Week 38 |
| Weekly volume (shares) | 8 306 598 |
| Avg. weekly volume YtD | 12 110 857 |
| Weekly turnover (BGN) | 31 067 467 |
| Avg. weekly turnover YtD | 54 415 917 |
FIXED INCOME AND MACRO DATA
Most recent macro data
| BGN/EUR exchange rate | 1.95583 |
| Inflation (HICP, YoY Aug) | 11.8% |
| Inflation (HICP, cumulative 2008) | 7.1% |
| GDP Growth (YoY H1 2008) | 7.1% |
| Unemployment (July 2008) | 5.9% |
| Public External Debt/GDP (July '08) | 11.9% |
| FDI Jan-July '08 (EUR) | 2.8bn |
| C/A Deficit/GDP (Jan-July '08) | -13.9% |
Source: BNB; NSI; National Employment Agency
| Type | Coupon | Maturity | Currency | Yield (%) |
| Treasuries | 3.75% | 16-Feb-10 | BGN | 5.48 |
| Treasuries | 4.75% | 11-Feb-11 | BGN | 5.33 |
| Treasuries | 5.20% | 04-Feb-14 | BGN | 5.23 |
| Eurobonds | 8.25% | 15-Jan-15 | USD | 5.90 |
| Sofibor | Overnight (ON) | BGN | 5.57 | |
| Sofibor | 3-month | BGN | 7.33 | |
| Sofibor | 12-month | BGN | 8.69 | |
| Base Interest Rate | BGN | 5.23 |
Source: BNB; UBB
news IN THE SPOTLIGHT
Bulgarian Banking System
Central bank governor: Bulgarian banks have no risk exposures to subprime MBS
Bulgarian banks have no direct exposure to subprime mortgage-backed securities, Bulgarian National Bank (BNB) governor Ivan Iskrov told a banking forum held in Sofia. Bulgarian lenders maintain the classical banking model, he said. The major effect of the global market downturn on the local banking system will be higher risk premiums and funding costs, according to the central bank governor.
Large European banks, which hold 81% of the assets of the Bulgarian banking sector, continue to inject liquidity into their Bulgarian divisions, according to Iskrov. He also added that local lenders maintain high lending standards despite the fierce competition in the sector. Standard exposures preserved the levels of last year, at 95.5% of the loan portfolios. Source: Dnevnik
credit crunch to increase loan prices in Bulgaria
The global financial turmoil will send secondary shock waves through the Bulgarian market by the channel of higher borrowing costs, local bankers estimated. Pressure on liquidity, loan and deposit prices is expected to continue to pile up. Loan prices are expected to increase by another 0.5 or 1.0%, according to Postbank executive director Asen Yagodin.
Borrowing costs started to increase in Sep 2007 when the beginning of the credit squeeze coincided with a tightened minimum reserve requirement of the Bulgarian National Bank, from 8.0% to 12% of the deposit base. Next, the deepening global crisis reverberated through the Bulgarian market with the Euribor and Sofibor moving upwards. Accordingly, the banks hiked interest rates on both loans and deposits in three consecutive months starting Feb 2008. As a result, the average household mortgages rose 70 bp to 9.07% from Sep 2007 to July 2008. The average rate on consumer loans crept by 1.67% reaching 11.15% over the same period. The rates of business loans of up to EUR 1m added 1.75% to an average of 10.91%. Source: FFBH, Dnevnik
Insurance
Brokers generated 33% of insurance premiums in H1 2008
Brokers generated 33% of the Bulgarian insurers gross premium income for H1 2008, the Financial Supervision Commission said. Brokers collected BGN 278m, up almost 40% YoY. Motor insurance accounted for 60% of broker-collected premiums, motor thirdparty liability ranked second with 18%, and property insurance accounted for 6-7%. General insurance accounted for 25% of broker-collected premiums, life insurance premiums were 21%, respectively. Source: Dnevnik
SELECTED STOCKS INDICATORS (table)
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Copyright: 2006 First Financial Brokerage House. All rights reserved.For further Information please contact FFBH, 2 Enos Str., 1408 Sofia, BulgariaPhone: +359 2 810 64 21, fax: +359 2 810 64 01, e-mail: ffbh@ffbh.bg, web site: http://www.ffbh.bg
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BWU Weekly 15-19.09.2008.pdf, 77 Kb
