Romanian investors waiting for government securities to diversify investments

Aurel Dragan 30/05/2018 | 08:58

There are not many saving instruments available in Romania. Bank deposit, mutual funds, Stock Exchange. Some are too risky, some are not to profitable. In the future there is hope for more government securities that may become an alternative.

PwC Romania has conducted a study showing the earnings obtained by investors on the capital market compared to those offered by government securities. According to the survey, BSE investors have on average earned up to 12 percent more than government securities investors over the past six years. During the six years, there were also situations in which the gain on the Stock Exchange was below the one at the state titles. However, in the case of long-term investments, the difference is obvious.

“We’re talking about an average. There have been years in which yields were over 30 percent, given that government securities were at 2.5 percent and that there were years when the yield on the stock fell below 2 percent, how was in 2015, and yields on government securities ranged from 3.7 percent to 4 percent. That 12 percent must be seen as an average, but at the same time the theory of finance says that risk and return are correlated. That’s why we are going to invest in the capital market, to take extra risk to anticipate higher earnings,” explained Ileana Gutu, senior manager at PwC.

It also noted that investors have more investment opportunities, given that the number of listed companies has increased over the last ten years.

“The number of companies has risen by 5 percent, which contributed 14 percent to the 20 percent increase in the stock market capitalization. We are RON 90 billion capitalized in 2017, we have about 90 listed companies and we observe quite a sectoral division: the oil and gas sector – with 40 percent, the financial services – by 35 percent, followed by the electricity sector,” said Gutu.

Cyclical sectors

“The analysis of the last 10 years on the Bucharest Stock Exchange shows that the consumer goods, health and financial services sector can be classified as cyclical sectors, which means that the price and profit of the share tend to increase during the expansion period and to decrease during the period On the other hand, on the basis of the figures for the last 11 years, the sectors that seem to be the least influenced by the economic cycle are oil and gas and raw materials. We are in a context of economic growth, If we look to the future we see that the International Monetary Fund says that Romania is currently at a level of economic convergence of 57 percent, compared to 65 percent expected to reach 2022. That is, where GDP per capita now as long as it is expected to be over a few years,” said Gutu.

Thus, investments on the capital market can bring investors a return, but they must also take into account the risks associated with these investments.

At the opposite end, zero risk, theoretically, are government securities that are currently not available to the population. The stock is also traded on the stock market in 2016, in the second series of the Fidelis program, which must be redeemed by the state this summer. Unfortunately, the program was stopped after just two releases in 2015 and 2016.

The Ministry of Public Finance has promised to launch a new treasury program for the population, Thesaurus, through which interested parties can buy such instruments from the Treasury units. The value of a title was set at a lion, and maturity and interest should be set at the time the issue was launched.

“In 2018, MFP will run an information and promotion campaign for planned programs. The indicative ceiling for this year is about RON 4 billion. The issuance of government securities for the population under the TEZAUR Centenary Edition will be issued on medium-term maturities. The interest rate will be determined by reference to the yield of government securities quoted on the interbank market for that maturity,” said the MFP in an announcement.

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