Info Sheet
09.09.2010
After several negative months for the Balkan markets, July was marked by positive sentiment. Bulgaria managed to “get infected” with this positivism only at the very end of the month, and thus it finished July with a small loss of 0.8% at 370 points for SOFIX. The index was in the red for a sixth consecutive month accumulating over a 13% decline year-to-date. Some of the main stocks depreciated significantly during the month, e.g.: Eurohold (-18%), Trace Group (-13%), Kaolin (-10%). Although there has been some animation lately, the activity remains at critically low levels. We witnessed some new anti-records such as the longest time without any transaction, the lowest turnover in the first hour of trading…
The news of the stock exchange changing its articles so it can go public like its Romanian counterpart also broke last month. The new leadership at the Financial Supervision Commission just released a document with the capital market development priorities, describing the opportunities for the establishment of new products, instruments and mechanisms, involving all market participants.
The trading turnover’s decline is also the case in neighbouring Romania, where it seems that only the local investors have stayed for the summer months. Nonetheless, this was one of the best-performing markets in the region with an advance of 7%. For the period Advance Invest registered a 3.3% rise, mainly thanks to the strong gains of the Romanian financial conglomerates SIFs, the infrastructure and energy companies.
The contraction of the Bulgarian economy has slowed down, with the GDP expected to decrease by 1% in the second quarter (vs. 3.6% in Q1 2010). Since March the industrial production is already above zero on an annual basis thanks to the processing sector, where export sales are the growth driver. The agriculture and services sector have stabilized too. S&P credit rating agency confirmed Bulgaria’s BBB rating with stable outlook. Among the major points was the forecast that the budget deficit this year will be under 4%, which would place Bulgaria in the top 5 states in the EU. The report reinforced the agency’s stand on the stability of the currency board and the fiscal policy.
The political instability and economic drama in Romania, which forced the cabinet to raise taxes among other unpopular measures, made a number of Romanian firms initiate the relocation of their businesses to Bulgaria. The move toward a progressive tax system, including pensions, is under discussion in the northern neighbor too. Despite the shakiness and unrest, for now IMF approved the release of the next tranche of international financial aid for the country. The capital market seems immune to such political shake-ups, which have turned into a normal condition for Bucharest through the years.