During 2022, out of 20 companies in the BET index, 9 outperformed the index (on a day-to-day basis), 2 came close to tying it, while the remaining 9 companies underperformed as compared to the index.
Today, we are bringing you an overview of the performance of the BET constituent companies as compared to the index as a whole, during 2022. Before we start, it has to be noted that just looking at how the companies and the index itself performed on a day-to-day basis does not tell us much, as you could have several consecutive days of increases/decreases, followed by a large swing to the other side. However, it can generally be observed that if companies outperform the index long enough, they will accumulate higher returns overall. What should also be taken together with this data then, is the overview of how the companies performed (in terms of percentage returns) during the year.
First off then, let’s start with BET as well as its constituents’ performance during 2022.
BET and its constituents’ price change in 2022 (%)
Source: Bloomberg, InterCapital Research
As we can see from the graph above, the best performer in the entire index is BVB, the stock exchange itself, with an increase of 39%. Periods of high volatility and a lot of transactions, which for better or worse, 2022 was an example off, benefitted BVB greatly, which recorded all-time highs in terms of the number and value of transactions during the year, which supported the positive sentiment towards the Company’s share. Next up, we have Transgaz, which recorded a 15.8% increase, Fondul Proprietatea, with a 2.5% growth, and Transport Trade Services, with a growth of 2.3%. In fact, these are the only companies that recorded positive returns during the year, meaning that out of the 20 observed companies, only 4 ended the year on a positive note. On the other hand, TeraPlast recorded a decline of almost 46%, followed by Purcari Wineries at 43.2%, Aquila at 40.2%, MedLife at 29.3%, DIGI at 24.1%, and so on. As is visible from the graph then, the majority of the companies not only recorded declines, but significant declines in 2022, a sentiment that was also present across Europe and the US, driven by high inflation rates, energy prices, the war in Ukraine, but also in Romania’s case especially, high-interest rates to fight the aforementioned inflation. To put things into perspective, the current interest rate at the Romanian Central Bank is maintained at 7%, which is several points higher than in ECB (which ranges from 2.5% and 3.25% for the 3 key interest rates). This also means that the equity and valuations of companies are under significantly higher pressure compared to the EU, as well as the fact that there is a higher FX risk for domestic and international companies/investors. All of this led to the aforementioned decline in value.
However, as already mentioned, the decline in the share price of the companies and the ability of a share to outperform/underperform compared to the index don’t always go hand in hand.
How often did BET constituents outperform the index in 2022? (%)
Source: InterCapital Research
Out of a total of 251 trading days in 2022, we can see that 9 companies had better returns than the index for more than 50% of this period. As compared to 4 companies giving positive returns, the point made earlier that even longer periods of growth can be interrupted, and even overturned by negative news (as was the case in 2022) can be seen here. In terms of the numbers themselves, Romgaz outperformed the index on most days, 54.6% of them to be exact. To put things into perspective, it recorded a share price decline of only 0.53% in this period. Next up, we have Fondul Proprietatea and Sphera Franchise Group, both of which outperformed the index on app. 53% of the days, but again, telling different stories. While Fondul’s share price increased by 2.5% during this period, Sphera Franchise Group’s share price declined by 10.5%. Following them, we have Transgaz and BVB, which outperformed the index on 52.6% and 52.2% of the days, respectively, while at the same time, giving the best returns out of all observed companies, BVB with 38.9%, and Transgaz with 15.8%. This does prove a point that outperforming the index can yield positive returns, but like the previous companies point out, it’s more of an exception (in times of volatility and uncertain macroeconomic situation, which 2022 can be characterized as) than the rule.
On the other hand, Aquila outperformed the index the least in 2022, on only 43% of the days, and yielded a negative return of 40.2%, followed by TeraPlast which outperformed the index on 43.4% and had a negative return of 46%. The following companies tell a pretty similar story, with MedLife outperforming the index 43.8% of the time, and yielding a negative return of 29.3%, and Purcari Wineries, outperforming the index 44.2% of the time and had a negative return of 43.2%.
Here we can see one other dynamic at play; negative sentiment, if sustained for a longer time period, tends to drive the share price down rather quickly. Finally, taking a look at the index itself, BET recorded a decline of 10.7% in 2022.
How much did individual BET constituents outperform/underperform compared to the index (2022, p.p.)
Source: InterCapital Research
