SOFIX TO REACH 1,000 POINTS TILL DECEMBER
The BSE-Sofia SOFIX index might reach 1,000 points at the year-end, Elana's analysts forecast on Monday. According to Venera Nesheva, the index will be smoothly moving upwards and there is a slim chance that the next levels are reached explosively (as was the case in the beginning of 2005), because the Bulgarian financial market is currently in a maturity stage. The expectation of a smooth movement of indices in 2006 is confirmed also by the market's situation in the first quarter of this year. Since the start of 2006 SOFIX has gained 6.3%, and the property BG40 index has gained 7.2 per cent. The volumes traded as of the beginning of 2006 are comparatively small and traders' activity has been concentrated on individual positions, Elana's analysis shows. The stock exchange lacks enthusiasm and the market badly needs new high-quality issues to pour energy into the stock trade. The highest rise has been registered by the paper of industrial companies such as Neochim, Orgachim, Sopharma, the Varna-based Odessos Dockyard, M+C Hydraulic, Hydraulic Elements and Systems, and Polymers. Capitals which were until recently invested in other shares (of holding companies mainly) are now directed to them.
According to Svetozar Abrashev from First Finance and Brokerage House, levels of 1,000 points at the year-end are quite probable. He believes that the companies included in SOFIX will continue to show good results. However, it is hard to forecast if the index itself would leap. If the privatisation of tobacco companies' (Blagoevgrad-BT and Bulgartabac Holding, which are included in the index) goes on smoothly, it could be expected to reach 1,000 points. An additional factor for its movement upwards, according to Mr. Abrashev, would be a positive report of the EC on Bulgaria in May, confirming January 1, 2007 as the date of this country's EU-accession. If the report is negative, however, most investors are expected to have considered such a development.
Mr. Geno Tonev from South Market also shares the stance that SOFIX would probably reach 1,000 points. It is currently quite close to that level and only a negative report of the EC on Bulgaria could result in a concussion. A political crisis could also hinder the upward trend on the BSE-Sofia, but at present there are no indicators that would happen, Mr. Tonev said. So, there are not many possible hindrances and the SOFIX index has to gain only 14.13% in order to reach the record high 1,000 points. The global economic situation, e.g. a Middle East crisis that threatens to increase fuel prices, could also have an impact on indices. New public companies, such as Chimimport, coming onto the stock exchange will have a positive influence on SOFIX.
According to Elana's analysts, the capital market could be initially stirred up by the listed companies' audited reports. They will be ready in end-March, early April. New issuers must appear on the exchange by the year-end and corporate profits should be growing steadily in order to attract investors' interest and the upward trend on the market to continue. According to analysts, positive surprises could be expected from tobacco companies if measures for Bulgartabac Holding's restructuring are successfully applied.
The capital market's analysis considers as well a possible depreciation of Bulgarian government securities under the influence of raising interest rates and yields in the Eurozone. That process will go on in the months to come and periods of strong fluctuations of prices as a result of changes in demand on the domestic market should not be ruled out. Government securities will remain the main instrument of investment on the part of Bulgarian institutional investors - pension and insurance companies.
As of March 20 banks and Bulgarian firms had sought financing through bond loans worth BGN1.7BN. Bulgarian companies had issued corporate bonds (secured and unsecured) worth BGN1.4BN, and banks had issued mortgage bonds worth BGN300MN. According to Maxim Ivanov, portfolio manager of Elana, financing companies through corporate bonds might become more expensive as banks are already obliged to set aside provisions for them. The aggregate amount of assets managed by mutual funds in Bulgaria is expected to exceed BGN100MN by the end of March 2006, analysts predict.