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Romania – world champion of frontier markets in 2017, by return on stock exchange investment

de Adrian N Ionescu 31.7.2017

Evolution of BET-TR since the beginning of the year

The Romanian capital market had the highest growth among all 23 countries in the portfolio of the MSCI Frontier Markets global index, according to an analysis by the Berenberg investment bank, quoted by a press release of the Bucharest Stock Exchange. Berenberg is the second oldest bank in the world.

The BET-Total Return (BET-TR) index of the Bucharest Stock Exchange (BSE) has increased by more than 40% in USD since the beginning of this year. It is followed by the stock indices of the markets from Argentina, Kazakhstan and Estonia.

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  • Top highest yields of frontier stock markets
  • Country           evolution of total return index (in USD since the beginning of the year)

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The result “was possible due to the double-digit dividends distributed by several companies and the market growth; the BET index reached the highest level in the last nine years,” the BSE’s press release says.

The BET-TR index is the weighted average of the variations in the quotes of the most traded 13 companies listed on BSE and, unlike the BET reference index, also includes the dividends.

The dividend yield of companies listed on BVB (7.6%) was already the highest in the world in June when many of the “dividend” terms had passed. The Czech Republic was on a par with Romania, followed by Oman, with 7.2%, and Kuwait, with 7%, according to another Berenberg analysis.

The return on the share price is added to the dividend yield.

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  • BET-TR index composition at 24.07.2017

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“Romania’s economy breaks record after record. The tiger of the economic growth in Eastern Europe is back and on the road to convergence with the Western Europe in the not so distant future against the background of the implementation of major structural reforms during the global financial crisis, of large inflows of European funds, foreign direct investment, and pro-European stance,” said Carsten Hesse, EME Equity Strategist with Berenberg.

Romania is among the “most dynamic capital markets” and entrepreneurs should not miss “this unique opportunity to finance through the capital market and get this way a new business dimension,” said Ludwik Sobolewski, General Manager of the BSE.

Frontier markets are markets that have a remarkable dynamic of quotations but do not have enough large listed companies to attract the flows from large global investors, more interested in frontier markets.

The BSE hopes that the state will list Hidroelectrica, an event that could cover the statistical shortcomings that still keep the market away from the emerging market status.

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