Yields of about 25-30%. That is what most brokers at the end of 2004 said investors would gain this year. The first day of trading, however, came with 10-15% increases for many of the listed shares, in a day that saw one of the strongest rises of the market indices in the history of the Romanian capital market.
"I read in the paper that the market will go up 30% this year. It has already gone up 10%. It remains to be seen which will be the days with similar increases this year," a broker was joking yesterday.
The BET index, which monitors the performance of the top companies on the Bucharest Stock Exchange rose 6% yesterday compared with the beginning of last year. Yesterday's stock market investors' gains equalled the interest yielded by a banking deposit in five months and were very close to the inflationary estimates for the entire 2005. The shareholders of the financial investment companies (SIFs) made even higher profits. The BET-FI, which gauges the performance of the SIFs, gained no less than 9.5% yesterday.
The total capitalisation of the Bucharest Stock Exchange thus reached 9.15bn euros, having increased by no less than 335 million euros.
The brokers' opinions as to the main reason why the stock quotes increased are unanimous: since the last trading session just before Christmas the corporate profit tax cut has turned into a certainty.
"We were all expecting the business of the companies on the BSE to do better this year. With the added profit tax cut, the BSE can only grow," says Daniel Pocorea, trading director with BRD Securities, BRD-SocGen's brokerage firm.
The new government in the last few days of last year enacted an emergency ordinance modifying the Fiscal Code, which had the tax levied on the corporate profit cut from 25% to 16% as of this year.
Another piece of good news for the stock market investors is that the increase in the tax on the gains related to the stock trades from 1% to 5% mentioned a few weeks ago was not enacted eventually.
"The profit tax cut will undoubtedly help improve the business environment and lead to a decrease of the price/earnings ratios," says Adrian Manaila, the manager of Eldeinvest company based in Galati. The price/earnings ratio is one of the most frequently used indicators when brokers and stock market investors are making decisions to buy.
The decline in the profit tax will see a company make 12% higher profits this year if its gross profit stays the same. On the other hand, the effect of the tax cut on the companies' profits was alleviated in the individuals' case by upping the tax on dividends from 5% to 10%.
Those that stand to profit the most from the new fiscal changes are the shareholders of those companies that disburse bonus shares instead of dividends.
The bonus shares see only 1% tax levied, the same as the profits made from trading on the Stock Exchange. Banca Transilvania, which is known for its constant policy to disburse bonus shares against its profit rose 10% yesterday, crossing the 10,000 ROL threshold for the first time since floatation.
vlad.nicolaescu@zf.ro
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