Investment Overview
09.09.2010
Investment commentary as of 31.12.2009
For capital market participants, 2009 was a year of fear, hope, disappointments, and surprises. The same year we declared as the end of the financial crisis, but had to stand face to face with the economic predicament. After the downward start of 2009, the first semester was marked by a long-anticipated event – the regional markets, specifically Bulgaria and Romania, registered bottoms at the end of February / beginning of March. The recovery commenced. For some markets this period was characterized by vertical, almost euphoric ascents, but for others (sadly, the Bulgarian Stock Exchange falls into this category) the stock market recovery has so far been tough and unconvincing. For the year, all in all, Bulgaria (the SOFIX index) booked a modest gain of 19%, while Romania (the BET index) literally exploded by 62%.
A serious problem, especially for the Bulgarian exchange, remains the critically low liquidity and inadequate market infrastructure, which obviously worked against the convincing recovery of domestic stocks in the second semester vs. the other regional exchanges with much higher turnovers. Meanwhile, the Romanian market managed to stay “alive” during the crisis and to even boast with recovering its activity back to pre-crisis levels. The existing questions around the macroeconomic stability of the Balkans are now definitely an obstacle to the return of the desperately awaited international investors. Later on we’ll describe the specifics and expected development of the two markets currently represented in the fund’s portfolio.
In an attempt to cushion the negative consequences, as early as 2008 ADVANCE INVEST undertook a defensive investment strategy, mainly through the increase of the cash position in the portfolio. As a result, the fund suffered smaller losses than the general market as a whole. As part of precaution measures this conservative approach lasted for a longer period. Only after reaching serious conviction of the positive market direction – in mid-year – the asset manager stepped up to implementing its traditional aggressive strategy. The cost of this precaution was that the fund did not fully participate in the market surge, thus falling behind the SOFIBET benchmark (which can be seen in the table below). Another reason for the divergence of the results vs. the benchmark is the fact that the share of Romania (which rose considerably more than Bulgaria) in the fund’s portfolio was around 20%, while in the benchmark – over 50%. What’s more, the recovery mostly affected the liquid blue chips, whereas many of the small caps in the fund’s portfolio – inheritance from the good old times - didn’t benefit from it.
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Archive
- Investment Overview as of 2009 - H1
- Investment Overview as of 2008 - Q4
- Investment Overview as of 2008 - Q3
Risk statement
The value of shares and the income from them can go down as well as up, profits are not guaranteed, and investors assume the risk that they may not recover the full amount of their investment. Investments in the mutual fund are not guaranteed by a state guarantee fund or any other institution. Past performance of the fund should not be viewed as a guide to future performance.