Identifying the best investment opportunities is a difficult task given the current context of the worldwide economic crisis, but crisis periods are also those that provide the best investment opportunities on the Stock Exchange. As a paradox, the first half of this year, which overlapped with the Romanian economy’s slide into the worst recession after 2000, brought some of the biggest profits of the last few years on the Stock Exchange.

The excessive panic experienced by the world’s capital markets since October 2008, after the collapse of the US Lehman Brothers bank, took the Romanian shares down to as much as 95% lower levels than the all-time highs of 2007, and the rebound that ensued brought investors on the stock market profits of more than 200% in some cases in a matter of months.

The overall Stock Exchange index, BET-C, has posted 5.4% growth since the beginning of the year (as of July 9, 2009), while the index of the ten most important listed companies, BET, has gone up by 17% and SIFs have gained an average of 28%. In the meantime, seven stocks on the Stock Exchange generated more than 100% profits, while five other posted growth of 50 to 100%.

Those who would have invested 10,000 RON in Rompetrol Rafinare (RRC) shares for instance, the company that controls the Petromidia refinery, or in shares of pharmaceuticals producer Zentiva – the former Sicomed (SCD) would have gained more than 14,000 RON in net amount, ten times the average interest offered by a one-year banking deposit in RON. A similar investment in SIF Oltenia (SIF5) shares, would have generated a 4,200 RON profit, three times the banking interest, given that the SIF Oltenia shares were down 40% in the first two months of the year compared with the beginning of 2009, which means a potential loss of 4,000 RON at an initial investment of 10,000 RON. For those who were not scared by the sharp plunge at the beginning of the year and went ahead and bought shares, the profits were even higher than in the first half of 2007, when the economy was going strong and the Stock Exchange was following a significant upward trend.

On the local market, the exit of some foreign investment funds and especially the sales by local investors based on their sentiment alone, made the shares spiral downwards even further, in some cases even reaching unjustifyingly low values, so that about half of the shares listed on the main market of the Bucharest Stock Exchange are now valued at less than 20% of their price in July 2007, when they reached their all-time highs, even after the spectacular increases of the last few months. At the same time, a peculiarity of the Romanian market, the extremely low liquidity, which most brokers see as a handicap, made Romanian shares decline more than those on the neighbouring markets, thus becoming undervalued on a regional scale. The same low liquidity may lead to a stronger rebound when investment funds return.

“In our opinion, the capital market in Romania is valued attractively compared with other markets considering the rate of economic growth (decline) expected for the next two years and the sovereign risk at the moment. We believe the companies with high stock market capitalisation are trading at a discount of over 30% at the moment compared with other countries. This is why, if taking into account the risk undertaken, the investment in shares with a high market capitalisation seems attractive compared with investment in smaller companies (which, besides the higher liquidity risk, also run the risk of being more affected by the macroeconomic performance),” explains Marius Mure[an, deputy chief executive of STK Financial, the company that manages STK Emergent investment fund, which is listed on the Stock Exchange, as well.