POSITIVE NEWS from FED - Bernanke: Fed could make new purchases of bonds to support the U.S. economy

President Federal Reserve (Fed), Ben Bernanke, said Friday that the central bank does not exclude new purchases of bonds to support economic growth and reduce unemployment in the U.S., which it considers a "serious concern," Bloomberg .

"Nonconformist policy costs are manageable, when carefully designed, so we can not exclude the continued use of such strategies, if needed," said Bernake in a speech before the bankers and economists gathered at the annual Fed symposium Jones from Jackson, Wyoming.
Bernanke's speech takes place two weeks before the meeting of the Fed's monetary policy committee, which will decide whether to record a further extension of the program to stimulate the U.S. economy.
Bernanke reviewed the measures taken by the central bank during the financial crisis, saying that they were effective in stimulating economic growth and improvement in the market.
He also warned that the unemployment rate will continue only if economic growth will accelerate over the long-term trend.
"I have not seen an improvement in the unemployment rate since January. If economic growth will not accelerate over the pace of recent years, unemployment will remain well above the likely maximum rate of job properly," the Fed chief said.

 Bernanke has shown that long periods of high unemployment caused "enormous suffering and loss of human talent" and could also lead to "sustainable structural damage to the economy".
Many members of the Fed's monetary policy committee said at the meeting in early august that will be needed soon new measures to stimulate the economy, if no signs of a "substantial consolidation and sustainable."
Fed chief reiterated remarks concluding the speech that "the Federal Reserve will take further action if needed to support a stronger economic recovery and sustainable improvement in labor market conditions in terms of price stability".
Recent developments in the U.S. economy could be unsatisfactory for representatives Fed.
U.S. GDP rose by 1.7% in the second quarter compared to the same period last year, against 4.1% in the last three months of 2011. At the same time, inflation is below the Fed target of 2%.

In the summer time - BIG VOLUMES for SIF3 Transilvania - something happens???

Shares of SIF "Transilvania" (SIF3) were the most heavily traded in the three summer months. Over 147,309,234 shares were exchanged between June 1st and August 29th, representing 13.49% of the company's share capital.

The analysts say that the major interest in trading comes from the good earnings the company posted in the first semester. This summer, 77,383,418 shares of SIF4 "Muntenia" were traded (9.59% of the share capital), 61,149,036 shares of SIF5 "Oltenia" (10.54% of the share capital), 35,058,857 shares of SIF2 "Moldova" (6.75% of the share capital) and 29,090,847 shares of SIF1 Banat-Crişana (5.3% of the share capital).

In the last three months, the biggest rise was seen by SIF "Banat-Crişana" (+40%), followed by SIF5 (+36.81%), and SIF3 (+26.75%).

Since June 1st, SIF2 has risen 26.02%, whereas the price of SIF4 fell 5.07%.
 

* Simion Tihon, "Prime Transaction": In the last 60 trading days, SIF3 had an average daily turnover of more than 1 million lei 

Even though it is hard to talk about high volumes, over the last three months, SIF3 and SIF5 have indeed seen trading volumes which exceeded 10% of their share capital, said Simion Tihon, broker at "Prime Transaction". 

 He said: "I think that the hike of the holding limit from 1% to 5% continues to have an effect. Over the last 560 sessions, SIF3 had an average daily liquidity of more than 1 million lei, being the most heavily traded SIF. The earnings it saw in the first semester, as well as the discount it had been trading at after the ex-dividend date have polarized interest in SIF3. 

At SIF < Oltenia >, I think it is really important that they have not yet sold their stake in BCR, and the company is still making good profits under these circumstances. The investment strategy of SIF5 is another catalyst for the investors' interest.

Shares of SIF2 and SIF4 had a good liquidity in the first quarter, and SIF1 saw major trades on the DEAL market. It's natural to have some quiet periods". 

Given the fact that over the last few weeks we have dealt with a period characterized by an acute lack of liquidity, Simion Tihon expects rising volumes in the second half of the year.
      

* Adrian Danciu, "SSIF Broker": "The turnover of SIF1, SIF2 and SIF4 is a gauge for investors' interest in the domestic stock market" 

Over time, each of the SIFs had a better period than the others, in terms of liquidity, as well as from the point of view of the stock exchange dynamic, said Adrian Danciu, analyst at "SSIF Broker".
 For example, SIF4 is a stock that does better against a downward trend of the market, most likely due to its greater diversification when it comes to the financial instruments it has in its portfolio, compared to the other SIFs, the analyst of "SSIF Broker" said. 

He said: "SIF3, together with SIF2, were the ones which reported the best earnings in the first semester of 2012. Due to the fact that the Net Asset Value Per Share (NAVPS) of SIF2 is the highest among the five SIFs, most likely the investors' attention has turned to SIF3. This was probably one of the most important catalysts when it comes to the interest in the shares of SIF < Transilvania >".

Considering the level of liquidity on the foreign markets, which is extremely low, as well as the domestic political context, Adrian Danciu views the turnover in the stocks of SIF1, SIF2 and SIF4 as a gauge for investors' interest in the domestic stock market.

Given the current shareholder structure, as well as the interest shown by some investors in the management, the analyst considers that we can also expect in the coming period for trading in the SIFs to account for a large part of the daily turnover of the BSE.

* Daniela Ropotă, "Intercapital Invest": The volume of SIF3 was average, compared to what was it was at other moments 

Out of the SIFs, it was SIF "Transilvania" that stood out through its trading volumes, even though they were moderate compared to those recorded in other times, said Daniela Ropotă, analyst at "Intercapital Invest".
     There can be several explanations for the trading volume of SIF3, such as the very good earnings it got this year, its investment strategy and the speculation concerning its reorganization, he went on to say.
     Daniela Ropotă went on to say: "It is currently hard to say how liquidity will evolve by the end of the year, since there have been no special events, and it's a tense period not just abroad, but domestically as well. Therefore, there are new arguments needed to motivate investors".
      

* Marcel Murgoci, "Estinvest": "High volumes attract more volume" 

The interest shown by market participants this summer in SIF5 and SIF3 may be due to the potential changes in the shareholder structure, as well in the potential awarding of a greater profit distribution rate, next year, said Marcel Murgoci, operations director at "Estinvest".
 These trades also attempt the accumulation of as much stock as possible in order to ensure a better voting position in the next elections for the board, he said. Furthermore, the higher trading volume recorded by these issuers captured the attention of other investors and a result trading volumes have seen increases: high volumes lead to more volume, Marcel Murgoci further explained.
 He said: "In the case of SIF2 and SIF1, the somewhat lower interest can be explained by the fact that there are no disagreements among shareholders in the two companies.
 In the case of SIF4, volumes have increased constantly, as a result of increased interest from some shareholders, which resulted in the general meetings for elections and the allocation of the special dividend".
 In the future, we may see higher trading volumes, as the general shareholder meetings get closer, with some of them concerning the elections for the boards of directors, said Marcel Murgoci.  

Surse: presa romaneasca

Wall Street gains on stimulus hopes, but ends week lower

Stocks climbed on Friday on news the European Central Bank is considering setting targets in a new bond-buying program that could help contain euro-zone borrowing costs and on hopes of more stimulus from the Federal Reserve.

 

Despite the day's advance, the S&P 500 broke a six-week string of gains. For the week, the benchmark index fell 0.5 percent. Conflicting perceptions of the Fed's commitment to provide more stimulus took a toll on the market this week.

 

Investor sentiment received a lift on Friday from U.S. Fed Chairman Ben Bernanke, who said the Fed has room to deliver additional monetary stimulus to boost the U.S. economy. Bernanke made the comment in a letter to a congressional oversight panel.

 

The letter comes a week ahead of the annual economic symposium at Jackson Hole, Wyoming, where Bernanke and ECB President Mario Draghi will speak.

 

The ECB is discussing yield-band targets under a new bond-buying program to let it shield its strategy and avoid speculators trying to cash in, central bank sources told Reuters on Friday. Any decision would not be made before the ECB's September 6 policy meeting.

 

"If there can be a nice balance of stimulus that keeps interest rates low, as opposed to throwing more debt at the problems in Europe, and some level of austerity, Europe can get out of this tangle. But that balance is really the key," said Bryant Evans, investment advisor and portfolio manager at Cozad Asset Management, in Champaign, Illinois.

 

The market's gains were fairly broad. The S&P financial index (REU:^GSPFI) rose 0.6 percent, with shares of American Express (AXP) up 1.9 percent at $57.49. The S&P consumer discretionary index (REU:^GSPDI) climbed 0.8 percent, with shares of Amazon.com (AMZN) up 1.9 percent at $245.74. During the session, Amazon's stock hit a lifetime intraday high of $246.87.

The Dow Jones industrial average (^DJI) rose 100.51 points, or 0.77 percent, to end at 13,157.97. The Standard & Poor's 500 Index (^GSPC) added 9.05 points, or 0.65 percent, to 1,411.13. The Nasdaq Composite Index (^IXIC) gained 16.39 points, or 0.54 percent, to close at 3,069.79.

Volume was the second lowest for a full day this year, with 4.6 billion shares trading on the New York Stock Exchange, the Nasdaq and the Amex. The year-to-date average is 6.6 billion.

The Dow also broke a six-week string of gains, losing 0.9 percent for the week. The Nasdaq slipped 0.2 percent for the week after posting five weeks of gains.

 

In a letter to a congressional oversight panel on Friday, Bernanke said, "There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery.

Early in the day, the S&P 500 briefly fell below the 1,400 level following cautious comments from German Chancellor Angela Merkel about Greece staying in the euro zone.

It was the first time in two weeks that the benchmark S&P 500 had dipped below 1,400.

"Intermediate-term, weekly indicators, tracking one- to two-quarter shifts are not yet overbought and, in theory, have potential to carry equities higher into the fall," said Robert Sluymer, an analyst at RBC Capital Markets LLC, in New York.

 

Among gaining stocks, Supervalu (SVU) shares jumped 10.9 percent to $2.35 as the U.S. grocery company's advisers sought potential buyers to bid for the entire business, even as several suitors have inquired about its individual parts, according to a Bloomberg report.

On the downside were shares of Autodesk (ADSK), which slid 15.6 percent to $30.13. The stock was downgraded by various brokerages a day after the design software maker's quarterly results fell short of expectations for the first time in nearly two years.

 

On the data front, new orders for durable goods, which are long-lasting U.S. manufactured goods such as computers and aircraft, surged in July, even as declines in a gauge of planned business spending pointed to a slowing growth trend in manufacturing.

 

The mixed data added to the market's uncertainty on whether the Federal Reserve will act soon to bolster the economy.

The LEU-ul, more sensitive to repos than to the political scene - 22.08 - ECHIPA BNR-ului INTOTDEAUNA PE FAZA :)

Analysts are predicting a smaller fluctuation of the leu after the decision of the Constitutional Court

The LEU yesterday depreciated against the Euro, after gaining for four consecutive sessions. The national currency fell almost continuously over the course of last month, as well as in the first days of this month, amid the political tensions. The trend reversed on August 6th, when the National Bank of Romania (NBR) announced it would cap the amounts it would lend to banks in repo operations at six billion lei. On that day, the exchange rate fell to 4.5740 lei/euro, more than seven bani below the amount recorded during the previous sessions. The drop continued for more than three sessions, with the Euro trading at 4.5362 lei on August 3rd. On the next session there was a slight rise, and then on August 13th, when the NBR announced another capping of the amounts lend in repo operations, to 5 billion lei, the exchange rate fell by almost 1 ban, to 4.5307 lei/Euro. The downward trend has remained in place for the entire week.

Yesterday the third consecutive repo cap was implemented. The Central Bank only offered lenders four billion lei, even though demand was more than three times greater. In spite of that, the leu no longer gained against the Euro.

 

* Aurelian Dochia: The NBR is faced with a compromise

The NBR is currently faced with a compromise, economic analyst Aurelian Dochia considers. The policy of the Central Bank to cap the amounts offered on repo has stabilized the exchange rate, but at the same time could lead to a significant increase in interest rates, which would affect the financing of the budget deficit, he explained. "The NBR is fighting on two fronts and it can't win on both. There is an interest in showing that the volatility of the exchange rate is not that big, but on the other hand, if the interest rate will continue to increase, we will probably see a more relaxed monetary policy from the Central Bank", said Aurelian Dochia.

The economic analyst does not expect the markets to react immediately to the decision of the Constitutional Court, because they have already weighed the three scenarios which seem to be most probable, namely the validation of the referendum, its invalidation or the postponement of the decision.

In the medium and long term however, the evolution of the exchange rate will depend on the policies of the Central Bank, as well as on the development of the political scene, he warned.
Aurelian Dochia considers that it is difficult to say which of the first two alternatives would be better, but stressed that the most harmful scenario would be to postpone the decision of the Court.

* Dragoş Cabat: Limiting the amounts offered on repo, only possible in the short term

The NBR can only implement the measure to cap the amounts it will lend to banks in the short term, said financial analyst Dragoş Cabat. If the Central Bank will continue to cap these amounts, there is the risk that banks will refuse to buy government bonds in the absence of increasing yields, he explained. "If the NBR will not give the banks lei with which to buy Euros, demand for government bonds would be severely affected", said Dragoş Cabat.

* ING: The decision of the Constitutional Court will not have a positive effect - intotdeauna au exagerat :)

The decision of the Constitutional Court (CCR) concerning the referendum for the dismissal of the president will not have positive effects, regardless of what it will be, a report by ING states. If the referendum is invalidated, and Traian Băsescu returns to Cotroceni, this would escalate the political war, said Vlad Muscalu, economist with the group.

If the CCR validates the referendum, and the president is dismissed, early presidential elections would follow, which runs the risk of escalating the possible fiscal overruns, which would cause even further foreign criticism, according to him. Not even the alternative where the Court does not make a decision would be favorable, because it would extend the uncertainty, the analyst said, who considers that this situation is also the least likely, as a decision needs to be made by at least six of the nine judges.

According to ING, the strengthening of the leu seems to have lost its momentum, which is supported by its sideways moves, and by the absence of a clear show of support from the NBR. "Negative price action on the main equity markets suggest that the leu could continue to weaken today, but the memory of the recent (assumed) interventions should limit its extent", Vlad Muscalu also said.

The exchange rate yesterday closed near 4.5 lei/Euro. The Euro also depreciated against the dollar yesterday, to 3.6404 lei, and against the Swiss Franc, which rose to 3.7413 lei.

Federal Reserve officials debate easing options

Minutes released from the Federal Reserve's latest meeting show the central bank is considering two key measures to boost the U.S. economy.

A third round of large bond purchases known as quantitative easing -- or QE3 -- is still on the table, as is a plan to lay out more explicit guidelines for Fed policy going forward.

While the Fed's policy-making committee discussed both options in detail, the minutes show that several members expressed concerns about QE3. Some fear that buying more Treasuries or mortgage-backed securities could distort the bond market, while others worried that additional purchases could "increase the risks to financial stability or lead to a rise in long-term inflation expectations."

But when it comes to using clearer communications as a tool, the minutes show far less dissension.

The Federal Reserve has recently said it is likely to hold interest rates near "exceptionally low levels" at least through late 2014, but at the August meeting, some Fed officials noted that they would like to extend that date out further.

This guidance in itself is thought to be an effective tool for stimulating the economy, since it leads investors to expect low returns on safe-haven assets and encourages investment in riskier assets like stocks.

 

Some Fed officials noted however, that the tool might be more effective if it was combined with clearer guidelines. For example, policymakers could lay out specific economic conditions that would push them to raise interest rates in the future.

A few months ago, several Fed members were only in favor of additional stimulus if the economic recovery deteriorated.

Now, it seems many are in favor of additional easing, as long as conditions remain the same.

"Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery," the minutes said.

Fed members also discussed lowering the rate on excess reserves or exploring a program like the Bank of England's Funding for Lending Scheme, but from the minutes, it doesn't seem either of those measures gained widespread support within the committee.

Chairman Ben Bernanke may offer more hints about the Fed's next move in a speech at Jackson Hole, Wyo. next week. The Fed's next meeting is scheduled to conclude September 13.

Fed looks set to ease fairly soon barring swift rebound

The Federal Reserve is likely to deliver another round of monetary stimulus "fairly soon" unless the economy improves considerably, minutes from the U.S. central bank's latest meeting suggested.

 

While the July 31-August 1 meeting occurred before some encouraging economic data, including a stronger-than-expected rise in July payrolls, policymakers were pretty categorical about their dissatisfaction with the outlook, according to the minutes released on Wednesday.

 

"Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery," the Fed said.

 

Wall Street stocks erased most losses after the Fed released the minutes. Treasury bond prices, which have been under pressure from stronger economic figures, extended gains. The dollar fell and the euro surged to a seven-week high against the greenback at the prospect of the Fed providing more stimulus.

 

The Dow Jones industrial average closed down 30.82 points at 13,172.76, although well above its session low, but the broader S&P 500 Index clawed back from losses to end 0.32 point higher at 1,413.49.

"Certainly these minutes are dovish and will revive hopes for increased Fed easing," said David Sloan, economist at 4Cast Ltd. "We have seen some improvement in the data recently, but whether it is enough to qualify as a significant upturn is unclear."

 

The Fed cut overnight interest rates to near zero in December 2008 and has bought $2.3 trillion in U.S. government debt and mortgage-related bonds in a further effort to push borrowing costs lower. It has said it does not expect to raise rates until late-2014 at the earliest.

 

Some officials at the meeting raised concerns about the Fed's large presence in the markets for Treasury and mortgage-backed securities, but others agreed with a staff analysis showing "substantial capacity" for buying new assets.

 

The Fed held policy steady at the gathering but signaled a renewed readiness to act amid lingering softness in the economy in a statement it issued following the meeting.

 

The minutes showed the central bank is actively considering a "flexible" bond-buying program, which suggests it may not announce an upfront amount to purchase, as it did in the past.

"A move to an open-ended policy stance would be a important and powerful shift in the implementation of Fed policy; it would, in effect, say that the Fed is in motion until the data tell it to stop," Michael Gapen, at Barclays Bank in New York, wrote in a research note to clients.

 

Fed officials saw significant risks to an already weak U.S. economy, which grew at a sluggish 1.5 percent annual rate in the second quarter. The risks include a worsening of Europe's financial strains and looming U.S. budget cuts and tax hikes, which have become commonly known as the fiscal cliff.

U.S. economic data since the meeting has been a bit less gloomy. Although employment growth slowed sharply in the second quarter, it picked up again in July, when the economy created 163,000 jobs. But the unemployment rate, which is derived from a separate Labor Department survey, rose to 8.3 percent from 8.2 percent in June.

At the last meeting, many Fed officials supported pushing back the likely timing of the eventual first rate hike, but they decided to defer the decision to the Fed's next meeting on September 12-13, when the central bank will release a new round of economic forecasts.

A few central bankers thought it might be a good idea to replace such language with guidance directly linked to economic factors, as has been proposed by Chicago Federal Reserve Bank President Charles Evans.

Officials also debated and tested the possibility of developing a consensus Fed forecast for the economy, and an associated path for monetary policy under a long-standing effort to improve communication on their thinking. They decided to hold a second test in conjunction with September's meeting.

 

A couple of policymakers favored lowering the rate the Fed pays banks to park their excess reserves at the central bank, currently at 0.25 percent. But several worried that money market funds could run into trouble if their returns are crimped further.

 

Officials noted the European Central Bank's recent decision to lower its deposit rate to zero offered a chance to learn about possible effects.

Similarly, a couple of officials broached the possibility of developing a loan incentive program like the Bank of England's recently minted funding-for-lending program.

The 80 billion pound ($127 billion) project, launched in June by the British central bank and the government, is designed to spur lending by tying banks' access to cheap credit directly to bank lending to households and businesses.

Positive outlook for the stock prices of "Transelectrica" and "Transgaz" - TEL & TGN on BSE

Expectations of the stock market analysts concerning the future evolution of the quotations of the two major energy transporters listed on the Bucharest Stock Exchange (BSE) - the National Company for the Transport of Electricity "Transelectrica" (symbol: TEL) and the National Company for the Transport of Natural Gas "Transgaz" (symbol: TGN), are optimistic. The shares of the two companies fell in the first half of the year, after the registration date for dividends, and their profits in the first semester were smaller than in the similar period of last year.

* Nicu Grigoraş, "Intercapital Invest": The shares of TEL can grant investors very good returns in the next months

Shares of TEL and TGN fell after the passing of the registration dates, just like most of the stocks on the BSE, said Nicu Grigoraş, broker at "Intercapital Invest". However, the downward trend was broken at the end of July, once the upward trend of the foreign markets was confirmed, which made the domestic market follow suit, he went on to say.
Nicu Grigoraş said: "The dividend registration date coincided with the end of the secondary offering conducted by «Transelectrica». Once the registration date fell, the shares of TEL fell, just like most of the listed companies. The downward trend was halted by the unexpectedly good evolution of the foreign markets during the summer. If this trend stays on, the shares of TEL will give investors very good returns in the coming months".
 The secondary public offer for 15% of the shares of TGN will most likely take place by the end of the year, under the pressure of the International Monetary Fund (FMI), the broker of "Intercapital Invest" said. In the opinion of Nicu Grigoraş, the success of the offer is extremely important for the subsequent development of the stock market, as well as for the ambitious public offers plan which the government wants to implement upon the insistence of the IMF, in the coming years.
Nicu Grigoraş also said: "it remains to be seen what will be the approach of the majority shareholder and of the intermediation union, when it comes to the technical method for conducting the offering and the price at which the stock will be made available to investors. I think that the success of the similar offer of «Transelectrica» could be a very good gauge, of how to adjust the price of the offer, as well as for the technical method for conducting the offer. The public offer of «Transelectrica» practically showed us what investors want from such an offer when it comes to transparency and the pricing of the stock".

* Mihai Chişu, "IFB Finwest": "I expect the offer of TGN will be successful if the state will use all the necessary ingredients"

"Transelectrica" and "Transgaz", two of the "blue chips" listed on the BSE, have evolved differently over the last years, even though they have the same majority shareholder, a similar monopoly position and similar lines of business, from certain points of view, said Mihai Chişu, broker at "IFB Finwest".
"Transgaz" is the company which succeeds in defying the financial crisis, while at the same time seeing rising profits and rewarding its stockholders generously, the broker said.
"Transelectrica", on the other hand, is more easily influenced by the evolution of the economy, as the Euro/leu exchange rate has a major impact on the balance sheet of the company, Mihai Chişu also explained.
"The firs six months brought smaller profits for both companies, compared to the similar period of last year, in the case of «Transgaz»m especially due to the increase in the amortization of fixed assets. When it comes to «Transelectrica», the explanation is lower revenues, due to the lower volumes of energy transported and the increase of the financial losses", he went on to say.
The offer of "Transgaz" has been awaited for a long time by investors due to the company's earnings and its line of business, the "IFB Finwest" broker continues.
He said: "I expect the offer to be successful if the state will use all the necessary ingredients: a price recommended by the consortium, adequate marketing, focus on institutional, as well as on retail investors, and a well drafted business plan, which would include the future plans for the company and its dividend policy. If aside from these criteria, the state will also consider it opportune to offers tax breaks to stock market investors, at least when it comes to listings, in order to make them more attractive, I am convinced that this kind of offers will enjoy great success and will spur the development of the Romanian stock market".
 

Igor Popov, "SSIF Broker": "In the medium and long run, I expect the stock of TEL will recover"

The evolution of the price of TEL after the Secondary Public Offering is disappointing, in the opinion of Igor Popov, analyst with "SSIF Broker". He explained: "Most certainly the investors who subscribed the offer at the price of 14.9 lei/share, were convinced they were making a good purchase and they didn't expect the price to go all the way to the low of 12 lei/share. There were probably a lot of people who subscribed just to sell in the market at a price as high as possible, but seeing the price was dropping, they got rid of their positions, and they put an even greater pressure on the price. If we add up the dividend paid by «Transelectrica» to the current market price, we will note that the stock only has to recoup 5% to reach the price in the offering.
I expect that in the medium and long term, the stock of TEL will recover. The company continues to generate a significant EBITDA (ed. note: earnings before interest, taxes, depreciation and amortization) which sooner or later will have a positive effect".
Igor Popov considers that indeed, the operational activity of "Transelectrica" generated smaller profits, which caused concern among investors. Nevertheless, he thinks that the changes in the tariff of the transport of electricity, which are unavoidable, and the potential for an increase in the consumption of electricity will boost the company's performance in the future.
In the case of the stock of TGN, the analyst says that he hasn't noticed anything out of the ordinary. The price of the stock has adjusted with the value of the dividend and has risen slightly, since the beginning of the year, which is fully justified by the higher degree of safety which the stock in question provides, said Igor Popov.
He considers that even as its earnings estimates have been cut since 2011, "Transgaz" achieved a satisfactory performance, and its profit only fell slightly.
"«Transgaz» has once again shown a high degree of stability of its earnings, and it remains a sturdy company, capable of providing investors with a «haven», in the context of the economic fluctuations", the analyst said.
As for the secondary offer of "Transgaz", the analyst said: "Looking back, to the experience of the offering of «Transelectrica», I find it hard to imagine the offering of «Transgaz» without a discount compared to the market price. It is true that this is a different company, with much better earnings and which might be of interest to a different group of investors. I think that we will see the price in the offering be approximately 10% below market price".

* Mihai Iulian Căruntu, BCR: "In 2013, there are chances of the stock of TEL stabilizing above 15 lei/share"

This year is unavoidably a weak one, in terms of financial results, for "Transelectrica", but probably not as bad as 2009 and 2010 were, considers Mihai Iulian Căruntu, coordinator of the Stock Market Research Team at BCR.
He explained that the reasons behind such as earnings are tied to the fact that the results which fundamentally influence the earnings had an unfavorable evolution this year: the contraction of the electricity output by over 5%, the fact that the tariff for the transport of electricity has remained the same as in 2011 and the depreciation of the leu against the Euro, which, aside from the higher interest expenses, also mean a financial loss from the exchange rate differences, which affect the net profit and the potential dividend, the analyst said.
However, according to the analyst of BCR, the good news would be that for the next year, there are perspectives for a completely different evolution of the three aforementioned variables, and as a result, there would be conditions for better earnings next year, which would support the price of the TEL stock in 2013, he stressed.
 Mihai Iulian Căruntu said: "«Transelectrica» is trading at a 35-40% discount compared to the similar companies in the West, which are, however, far more leveraged, which would leave room for an improvement in the valuation of the stock of TEL, in the medium run. In spite of the perceived high risk of regulation, we think that the shares of TEL are trading at a an excessive discount compared to other similar companies, and in 2013, in the case of improved financial results and depending on the general conditions on the financial markets, there are chances of the price stabilizing above 15 lei/share".
Shares of "Transgaz" also fell 10%, this year, while they reconfirmed their status as the most stable dividend stock on the BSE, with a dividend yield of 12%, before the ex-dividend date, the analyst of BCR said. "This in itself indicates the fact that the market, and indirectly, foreign investors are asking for very low prices (in other words, very high discounts, compared to similar assets on the mature markets) in order to expose themselves to the Romanian assets", he said.
The H1 earnings of "Transgaz" were lower, due to the drop in the volume of the transport business, says Mihai Iulian Căruntu, and he estimates that the annual earnings will be slightly lower compared to 2011. "They will however be good enough to allow the granting of a dividend in 2012, which would represent dividend yield of more than 10%", the analyst said.

In light of the secondary public offer of "Transgaz" which will be launched by the government, Mihai Iulian Căruntu said: "The most important thing will be for the majority shareholder, the regulatory authority - ANRE -, and the company to clarify to what extent, at the request of the European Commission, the business of transit with «Bulgargaz» and «Gazprom» may be partially or fully regulated (more likely in the case of «Bulgargaz»). In this scenario, it needs to be clearly said to what extent the company's profitability would be affected, since it is well known that the transit activity accounts for 40-50% of the operating profit. The perception concerning the regulation risk of «Transgaz» is deteriorating anyway after, for the third consecutive year, the company did not see an increase in the domestic transport tariff for three years in a row, without any public explanation from the regulatory authority on that.
As for the potential discount which the price of the SPO might offer compared to the market when the time comes, there will probably be a discount which will offer a strict motivation to investors in the short term. But investors will decide whether the price of the secondary public offer is attractive or not simply based on their perception of the regulatory risk and part of the marketing effort will need to focus on that area".
Considering the stability of the transit business, the current price on the BSE would be attractive as a reference, compared to the dividend yield, the stability of the company and the valuation levels of similar companies, considers Mihai Iulian Căruntu.

 

* Simion Tihon, "Prime Transaction": "I thin that when it comes to the offer of TGN, market context will be very important"

In the case of the secondary public offer for the sale of 15% of "Transgaz", the market context will matter a lot, considers Simion Tihon, broker at "Prime Transaction". He said: "We saw what happened at «OMV Petrom» and, later, with «Transelectrica». The discount will certainly be a criterion which will cause investors to participate in this offering or to stay away, and I think that the state will appropriately use the expertise it gained in the «Transelectrica» SPO. I am referring here to discount as well as transparency".
After the offering, what is important will also be the general context of the market, when and how the state will decide to allocate the shares in the offer to the institutional and retail investors, Simion Tihon also said.
The shares of "Transelectrica" had a negative evolution, after the public offer in the month of March, an evolution which was caused both by the financial results of the company, by the ex-dividend date, as well as by the difficult international context, he said. "In the medium and long term, the expectations are optimistic for the stock of «Translectrica», even as the exchange rate and the negotiation of the transport tariff for energy have an important influence on the company's earnings", the broker said.
The shares of "Transgaz" had a very good start this year, with the correction following the ex-dividend being followed by the same unfavorable international context, Simion Tihon added.
The two companies reported slightly lower earnings, but they are a correct reflection of the state of the economy, the broker of "Prime Transaction" considers.