The September 22, 2014 trading session was opened by the Index Committee of the Bucharest Stock Exchange (BVB), on occasion of launching BET Total Return index (BET-TR).
BET-TR is the first total return index launched by BVB, based on the structure of the reference index for the local market, BET. BET-TR tracks the price changes of its component shares and is adjusted to also reflect the dividends paid by constituent companies. Similarly to BET, the main selection criterion for BET-TR is liquidity. The index thus includes the 10 most traded companies listed on BVB, excluding the financial investment companies (SIFs).
These 10 companies currently account for more than 86% of BVB's domestic market capitalization and have generated approximately 75% of the total turnover on the regulated market over the first 8 months of the year.
Ludwik Sobolewski, BVB’s CEO and member of the Index Committee, said that the launch of BET- TR index is one of the many changes that the local market and the Exchange itself undergoes.
“This index will be a valuable tool for investors as it will allow them to watch and to follow the performance of the companies included in BET, the main index of BVB. BET-TR index will show to the investment community what is the performance of these companies in total, including the dividends they offer to investors. It will also allow us to let investors know that Romanian companies can generate profits and this level of profits is quite attractive”, stated Ludwik Sobolewski.
He also mentioned other important events related to the Bucharest Stock Exchange indices, such as the change in the methodology of some indices, the launch of BET Plus index in June, and the introduction of disclosure and IR criteria for companies included in BET index, which will come into force as of the beginning of next year.
Lucian Anghel, President of the Index Committee and President of BVB’s Board of Governors, showed that international investors are interested in the yields that Romanian companies offer.
“From discussions with almost all international investors, big names, top rank, when we mention the average dividend yield in Romania of 5-6%, everyone writes this down, because they are surprised by this indicator. The attractiveness of the market, which is measured with indices, is important in reaching our strategic goal in the medium term, the upgrading from frontier to emerging market status. There were many new important features introduced in the last 12 months and which until now have determined a 40% turnover increase compared to last year, which was the second best in BVB’s history in terms of turnover”, said Lucian Anghel.
He mentioned that international investors that follow many capital markets receive information mainly through indices performance and BET-TR will offer the Romanian capital market a much better positioning.
“Dividends represent one of most important elements that will help us to promote the capital market image and to show its true value”, also said Lucian Anghel.
Bogdan Campianu, member of the Index Committee and one of the intermediaries’ representatives, stated that BVB had to introduce a total return index, an index which is widely-used by all developed markets.
“I think that there are very important measures, those taken so far by BVB to improve the legislation, to lower the costs, but it is also important to have the right tools to measure BVB’s performance”, he added.
Ovidiu Dumitrescu, member of the Index Committee and also one of intermediaries’ representatives, stated that it is important that BVB shows its qualities in order to gain investors’ confidence.
“If we look to West, one of their basic principles is that if you don’t trust yourself and you don’t promote yourself means that something isn’t right with you and then why would others have confidence in you? What the Index Committee tried to do is in the spirit of what I see the new management of BVB is doing for a while, meaning that it is trying to support the Bucharest Stock Exchange to reach the highest global standards. It is important because the phenomenon of globalization has already became a truism and we have to take care not to fall behind, but always try to innovate and to bring our arguments in this continuing debate which is the stock market”, Ovidiu Dumitrescu stated.
Adrian Mitroi, member of the Index Committee representing CFA Association Romania, reminded that in developing markets, like Romania, companies pay to their shareholders important dividends, which represent benefits for investors.
“Developed markets pay small dividends. One of the attractive points that we can offer is represented by dividends and BET Total Return comes as a glove for the need to measure the full return that can be offered”, added Adrian Mitroi.
Ludwik Sobolewski also said that the Romanian capital market still has many barriers which are causing low liquidity, which is a risk for international investors.
“For those already present in the Romanian capital market, dividends paid by companies are some sort of compensation for the risks taken by those investors when they entered in the Romanian capital market. International investors are also interested in how the process through which the dividends get to their accounts is organized. This issue is greatly important and it is treated by international investors as something that can even be decisive for them, if to invest in listed companies at BVB or not. Everything which is in relation to dividends is strategically important for us, for the market”, concluded Ludwik Sobolewski.
