Romanian bourse's blue chip index boasts fastest growth in EU

Romanian bourse's blue chip index boasts fastest growth in EU
By Iulian Ernst in Bucharest April 17, 2018

The Bucharest Stock Exchange (BVB) reported its blue-chip index soared by 12.4% during Q1, hitting the highest value in 11 years (8,816 points). 

The increase is the largest among the capital markets of the European Union, the BVB highlighted, adding that only nine EU markets saw their main indices going up in the first three months of the year.

The market capitalisation (local market, including local companies) topped €21.5bn by the end of March, while the capitalisation of all the companies listed on the BVB (including foreign companies listed in Bucharest) neared €39bn.

The rise was driven by the massive dividends paid by major Romanian companies, mainly utilities (which are subject to regulated prices) and mainly state-controlled, after the government asked for above-90% dividend payout ratios, continuing the policy initiated last year with the aim of improving the budget revenues. 

The average dividend yield calculated for Romania’s blue chips included in the market’s main index BET was 6.2%, if calculated for the dividends paid out from their 2017 profits, Ziarul Financiar daily reported on April 1. The highest dividend yield (13.2%) was paid by the natural gas producer Romgaz that is 70% controlled by the state. Romgaz’s shares rose by over 20% during Q1, marking the second-best performance after Banca Transilvania (+23%).

The side effects of such policies are seen in the companies undershooting their investment targets last year. “Basis effect aside, the dividends have significantly contributed to the consistent growth of the Romanian stock exchange,” the BVB admitted in its press release.

"The very good financial results reported by the vast majority of listed companies and generous investors' dividends, coupled with positive economic prospects, have supported the upward trend in the stock price of listed companies so this explains why the Romanian stock market had a significant growth in the first three months of this year," said Lucian Anghel, president of the board of governors of the BVB.