Under the influence of the global financial crisis, investors at the Bulgarian Stock Exchange (BSE) lost January 22 nearly two billion leva. The sum is tantamount to overall losses during the first three weeks of this year, Dnevnik daily said on January 23. The main BSE indices have shed 20 per cent off their values since the turn of the year.
The mortgage crisis, that led the US into a crisis, hit Bulgarian financial markets hard on January 22 when the main indices lost as much as 10 per cent.
Driven by uncertainty, many investors opted to sell their shares, which led to a record drop on the Bulgarian bourse. On Tuesday alone, some shares lost as much as 10 per cent, while shares in the financial sector were traded at a 20 per cent lower price. Since the beginning of the year, losses were estimated at 4 billion leva, Dnevnik said.
The situation remains serious, Dnevnik said, pointing to the Federal Reserve's base interest rate cut on January 22, in what is the first time since September 11 2001.
The plunge in Bulgarian public companies' capitalisation hurt both equity owners and collective schemes' stakeholders alike. The return of mutual funds, the main alternative to deposits and the hit for retail investors last year, has also been generating losses, Dnevnik said.
The negative developments on international markets have only sustained the downturn on the Bulgarian stock exchange. Since the turn of the year, only one session saw the SOFIX end with a positive result.
Tsvetoslav Tsatchev, the chief analyst at Elana brokerage, told Dnevnik that panic overwhelmed bourse actors. “This is an absolutely unknown and new exercise in the Bulgarian bourse's record,” Tsatchev said. “Most probably we are witnessing the termination of repo deals signed in October and November [2007].”
Against this background, some mutual funds bearing high risk have lost 15 per cent off the net value per share, the January 22 decline excluded. Brokers called on mutual funds stake owners to not give in to panic because the downward correction is temporary whereas investment in mutual funds' stakes is a long-term investment. Funds which have opted for investment in bonds are even capitalising on the downturn, analysts were quoted by Dnevnik as saying.
The financial crunch has influenced the returns of pension funds as well. However, since their exposure in foreign assets is smaller, the losses would be of a lesser scale.
Analysts are split on the future developments of the stock exchange market.
Ognian Donev, CEO of Sopharma and a professional investor, remains unperturbed and maintains that the parameters of Bulgarian companies remain good. He ascribed the downturn to external developments rather than poor corporate performance. On the contrary, corporate results are slated for all-time highs this year, according to Donev. That, respectively, should predicate the turnaround on the BSE.
Other experts believe that the current lows are said to be tested again in a month or two. If the bourse then submerges below the current low, the cumulative value of shares is expected to go down by 10-15 per cent.
Capman CEO Capman Nikolai Yalumov argues the bourse has already tested the bottom and the intervention of the Fed will help the market recover the losses. The development is said to have a positive impact on the local market. Yalumov added that such a scenario for the BSE would be logical because the downturn on the local bourse would come as international investors with high-risk investments in Bulgaria opted to sell.
