January effect strikes again on the Bucharest Stock Exchange

Strong start of the year on the Bucharest Stock Exchange, as the first trading day generated yields of 5% for the BET benchmark index and 8.6% for the BET-FI, which gauges the performance of the SIFs, the most liquid shares on the market.

Almost every share in the top 25 traded shares on the market went up. The only exception was Oltchim, which lost 3.8%.

January has already become a traditional time for strong growth for the Stock Exchange. The first trading day of the year has generated 2.5% to 5% yields over the last five years, close to the interest of a six-month banking deposit at the moment.

Still, yesterday's surge on the Stock Exchange is making brokers cautious, particularly because the yields of the most liquid shares have been going down year after year.

Moreover, the SIFs, which are now "ruling" over the market, come after a time of steady growth that began last autumn, a situation close to what happened in 2006. "People bought out of enthusiasm, expecting new funds to enter the market as a result of the accession to the European Union. It remains to be seen whether these expectations were right or not," stated Daniel Pocorea, deputy general manager of BRD Securities.

Brokers say that, after all, the positive effects of the accession will show in the medium rather than short term.

"Considering the foreign investors will see us as an "EU" branded market, even marginally, the impact may be positive even in the short term, but only because the market is still very small. I believe we will be seeing growth in terms of transactions conducted by non-resident investors, but I believe they will be largely speculative," Pocorea says.

Brokers, however, expect the financial sector to generate the best yields of all the major shares on the market this year again.

"A reasonable estimate for the increase of BET-FI this year is 25-30%, and 20% for BET," believes Adrian Ceuca, deputy general manager of Broker Cluj.

"I see the indicators or, in other words, the growth potential, in the financial sector mainly. The SIFs, I believe, will have another beautiful, yet hectic, year. All in all, I think we can be talking about a 20% gain for 2007," Daniel Pocorea believes.

On the other hand, Nicolae Pascu, the chairman of investment manager STK Financial, expects the BET index to outperform BET-FI this time, and feels some yearend unpleasant surprises are not out of the question as far as SIF investors are concerned.

"The BET index should normally appreciate by more than 10%. I would not see it standing too much of a chance of appreciating by over 20%.

"On the other hand, considering the profitability trend is going down, if this trend maintains, there is at least one question raised about the sign (plus or minus i.e.) of the fluctuation of the SIFs at the end of the year compared with last year," Nicolae Pascu believes.

Source: zf.ro