With monthly investments of RON 100 in the BET index BVB investors could have accumulated RON 350000 in 25 years

Autor: Monica Preda
Timp de citit: 5 minute

The BET index of the Bucharest Stock Exchange (BVB) reached a new all-time high in September. At the end of the trading session on September 20th, BET showed a level of 14,466 points.

Just last month the BET index rose by 8.2%, and since the beginning of the year it has grown by 23%. The BET index marked its 26th anniversary last month.

The evolution of the BET index was closely linked to the evolution of the Romanian economy and experienced periods of both decline and sharp growth.

BET was the first index developed by the BVB and was launched with 10 companies in September 1997, two years after the re-establishment of the stock exchange, after the institution of the Stock Exchange was closed for almost half a century by the Communist regime.

BET is a free float capitalization weighted price index, and currently the maximum weight of a symbol is 20%. The main selection criterion of the companies included in the index is liquidity.

Starting from 2015, criteria related to the transparency of issuers and the quality of reports and their communication with investors are also applied to the selection.

Currently, the Bucharest Exchange Trading (BET) index includes the 20 most traded companies listed on the BVB’s Regulated Market, excluding investment companies. The 20 companies included in BET are, in order of the weight in the index: Banca Transilvania (TLV), Hidroelectrica (H2O), OMV Petrom (SNP), Romgaz (SNG), BRD – Groupe Societe Generale (BRD), Nuclearelectrica (SNN) , Fondul Proprietatea (FP), Transgaz (TGN), MedLife (M), One United Properties (ONE), Digi Communications (DIGI), Electrica (EL), Transport Trade Services (TTS), Transelectrica (TEL), TeraPlast (TRP ), Bucharest Stock Exchange (BVB), Aquila (AQ), Purcari Wineries (WINE), Sphera Franchise Group (SFG), Conpet (COTE).

The liquidity of the capital market in Romania experienced a period of acceleration in recent years and multiple records were displayed on different levels of liquidity.

The total trading value of all types of financial instruments on the BVB’s Regulated Market registered an all-time high at the end of the first 9 months of this year, when it exceeded RON 26.3 billion, equivalent to EUR 5.3 billion. The average daily liquidity this year reached RON 141 million, the equivalent of EUR 28.5 million.

The third liquidity indicator represented by the number of transactions exceeded, at the end of the first 9 months of this year, the 1.25-million threshold.

In Romania there are almost 160,000 trading accounts on the capital market, and the average value of the portfolio for fully compensable investors within the ceiling of EUR 20,000 is EUR 4,250, according to the data of the Investor Compensation Fund (FCI).

In terms of the cash availability of the population, the data of the National Bank of Romania (BNR) show at the end of August a new record in terms of total deposits, which exceeded 317 billion in RON equivalent. Of this total, almost half represents overnight deposits.

According to the calculations made by BVB, whoever would have invested RON 100 every month in the companies included in the BET index and would have reinvested the dividends would have accumulated an amount of RON 349,311, from the end of 1998 until September 2023, so the last almost 25 years.

By comparison, the same person would have accumulated RON 29,800 in cash equivalent or RON 74,793 if he had placed the money in deposits. Those who would have decided to invest in European shares, included in the STOXX600 index, and would have reinvested the dividends would have accumulated RON 101,379, those who would have invested in the MSCI World index, which reflects the evolution of companies in developed markets, would have now amassed RON 142,907.

Whoever would have invested every month for 25 years in the S&P500 index and reinvested the dividends would have stockpiled RON 185,455 today.

Chart 1 shows the comparative performance of these tools and is accompanied by a description of how this simulation was done and the disclaimer associated with this performance.

The simulation was carried out taking into account the investment of an amount of RON 100 per month starting from December 1998 until September 2023 in the indices presented in the graph.

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In the case of the Romanian stock market, the total return performance (including dividends) is captured starting from October 2012, prior to this date the performance included in the simulation is one of price, not including dividends, and is captured by the BET index.

Similarly, in the case of the STOXX 600 GR index, the total return performance is captured since January 2001. The reference interest rate of the interbank money market, ROBID 12M, was used as a benchmark for investing in a term deposit. The simulation was carried out at nominal value and does not take into account transaction costs or other types of costs

Radu Hanga, President of the Bucharest Stock Exchange said: „BET was the first index developed by BVB, in September this year it marked 26 years since its launch and also last month it reached a new all-time high.

The BET index now has 20 companies with a capitalization of almost RON 60 billion, and zooming out to the entire market, today we have 370 listed companies with a total value of over RON 285 billion. On the other hand we see that half of the money held today by the population in the banking system is in current accounts and overnight deposits, without interest, and we are talking about RON 155 billion.

If for every RON 1,000 from deposits a Romanian would invest RON 100 or 200 every month in companies listed on the BVB, either directly through the authorized brokers or indirectly through investment funds, the data show us that in the long term those who decide to invest will be better off financially.”

Adrian Tanase, CEO of the Bucharest Stock Exchange said: „Who would have invested RON 100 every month in the companies included in the BET index since the end of 1998 and would have reinvested the dividends would have accumulated in the portfolio after almost 25 years an amount approaching RON 350,000.

By comparison, if they had kept the money in cash they would have had RON 30,000 today, if they had left it in deposits they would have had RON 75,000 today or if they had invested it in foreign indices, such as the S&P500, they would have accumulated the equivalent of RON 185,000.

Investing in the Romanian stock market every month and in the long term represents a strategy accessible to most Romanians, it is easy to implement, and the transactions are carried out instantly and in complete safety.

We confidently look to the future and prepare the necessary infrastructure for the development of the market so that next year we will have a much more sophisticated market that meets the most diverse needs of investors.

Among the events with a significant impact on the capital market, Hidroelectrica’s IPO and the continuation of the growth trend in terms of the number of investors in the capital market stand out.

The offer of Hidroelectrica (H2O), a leader in electricity production and the main provider of technological services needed in the National Energy System, which was held at the Bucharest Stock Exchange (BVB) between June 23 and July 4, 2023, ended successfully and became the largest initial public offering (IPO) ever made on the Romanian stock market.

Hidrolectrica’s IPO attracted a total of RON 9.28 billion (about EUR 1.9 billion EUR or USD 2.1 billion) for 89.7 million shares representing 19.94% of the total number of shares and became the largest IPO in Europe and the third largest in the world considering the IPOs so far this year.

Hidroelectrica debuted on July 12th on the BVB’s Regulated Market and is the largest Romanian company listed on the BVB in terms of market capitalization.

The number of investors in the Romanian capital market continued to grow and reached almost 160,000 investors at the end of the first semester of 2023, according to data from the Investor Compensation Fund (FCI).

By comparison, in 2019 there were almost 54,000 investors. This represents a 200% increase over the past five years. Moreover, once the threshold of 150,000 investors was exceeded, the capital market in Romania reached a new all-time high.