Regulars
Vivid SHARE PORTFOLIO

by Adrian Stefanescu
December 2004

Our assumption that considerable amounts of capital had entered Romanian stocks in October proved to be correct: the figure ñ 34.8 million euros is indeed impressive, equalling the total amount of foreign capital inflow into both stock markets for the combined years of 2002 and 2003. We assume also that, since there are relatively few stocks that can absorb such amounts, blue-chips such as SNP Petrom, BRD Soc Gen, Banca Transilvania and the five SIFs were the main beneficiaries. Having said that, the fresh cash injection had a positive impact on both liquid and illiquid stocks alike. It is also good to know that foreign investors were not discouraged by the election and the prospect of a change in government.

Accordingly, the BET index reached 3801 points on 15th November, a 75 per cent year-to-date surge that has proven to be more than a worthwhile hedge against inflation (which is targeted to be 9 per cent for 2004.) Ahead of Romania's EU accession in 2007, this is expected to continue next year and in 2006.

As for our portfolio, we continue to hold BRD Soc Gen (BRD) and Argus (UARG) since we expect further upside potential in those stocks. But we did sell 10,000 BRD at ROL 32,400 and 5,000 UARG at ROL 34,900 to free up some cash to purchase our favourite closed-end fund, SIF5. Why? We expect a strong performance in SIF5 before the end of the year, prompted by a sale of SNP Petrom's stake while the stake was bought back by SIF5 at a lower price as a result of exercising some pre-emptive rights. Of the five SIFs, SIF5 is trading at the largest discount compared with its net assets, the price/book ratio standing at 0.58. SIF5's portfolio, as well as holding stakes in hundreds of Romanian listed or non-listed companies, contains all the BSE blue-chips - SNP Petrom, BRD Soc Gen, Banca Transilvania. Accordingly, we bought 70,000 SIF5 at ROL 7,400.

These comments shouldn't be construed as advice or recommendation to invest in any kind of security or to buy and/or sell the above discussed stocks. The value of stocks can rise and fall and a successful track record is not a guarantee of future success. The author of the above article is an active investor on the Romanian capital market, who is currently trading the stocks discussed above, thus his comments should be considered accordingly.

HOW THE PORTFOLIO STANDS