Bucharest Stock Exchange (BSE) lost from the start of the year, since the first news about Coronavirus, 34% (EUR 13,2 billion) from the market capitalization, according to ”The Valuation multiples in the context of Bucharest Stock Exchange and local M&A market” report of PwC Romania. Thus, the decrease since the beginning of this year exceeded the increase of 23.4% recorded in 2019 compared to 2018, which marked the best performance of the BSE since the financial crisis. In the last 8 years the average yield registered by the stock exchange indices has exceeded the government bonds yield.
In 2019, BSE's capitalization increased by 23.4% to EUR 37.8 billion, sustained by high dividend yields, local economic growth above the EU average, promotion to the emerging market status and a series of changes to the legislative provisions.
In the context of COVID-19, BET, the main index of the stock exchange, fell by about 25% between 30 December 2019 and 30 March 2020, from a 35.1% increase recorded last year. The same decrease was registered by the BET-TR index, which includes the first 17 most traded shares, after an advance of 46.9% in 2019.
”The current context of COVID-19 has had a direct impact on capital market development, as a result of investor fears regarding the pandemic. Due to the massive depreciation of the shares, we find that in March 2020, both the volume and the traded value increased approximately twice compared to December 2019. The profit obtained on the capital market was analyzed by comparing the performance of BET and BET-TR with the evolution of state bonds, and from our analyzes, conducted between 01 January 2012 - 30 March 2020, it turned out that the return on the capital market is above that of bonds. This return compensates investors for taking on the relatively higher risk when investing on the stock exchange”, said Sorin Petre, Partner PwC România.
In the period from 1 January 2012 to 30 March 2020, the median excess return of BSE indices exceeded Risk free rate by 4.8% for BET and 13.9% for BET-TR. As far as for the 5-year CDS (Credit Default Swap) evolution, including the cost against non-payment, it is noticed a significant increase of 30% between February and March amid the sanitary crisis driven by coronavirus.
”Romania enters COVID-19 outbreak after 9 consecutive years of economic growth. It is expected that a contraction of the Romanian economy and the degree of severity will depend upon how long COVID-19 pandemic persists. The weakest performance of the BSE in the last 13 years was recorded in 2008, when, due to the recession, the market capitalization level was RON 46 billion, almost four times lower than the maximum level registered in 2019”, said Ileana Guțu, Senior Manager PwC Romania.
The main conclusions of the report for 2019
About the report
The study presents the valuation multiples trend for 79 listed companies on BSE covering the period between 2007 and 2019, with a focus on the Consumer, Oil & Gas, Financial services, Healthcare, Industrial, Materials and Electricity sectors. We have also performed an analysis of valuation multiples trends in these sectors based on a selection of 198 closed transactions between 2007 and 2019 for which robust financial data were readily available.
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Sorin Petre, Partner
Ileana Guțu, Senior Manager
Marketing and Communication Leader, Romania