Bulgarian Stock Exchange

Bulgarian Stock Exchange blue-chips index SOFIX reaches 8.4 year high closing at 624.91 on March 10, 2017. This is 2.4 times above the February 2009 low for the period and 1.25x above the low at the end of October 2008.

The index has still way to go to reach its all-time high of 1934.45 points reached in October 2007.

SOFIX 8 year performance (Source: Bloomberg)

SOFIX is 40% on the upside for the last 12 months

Year on year SOFIX added 40% with key contributors to return industrials, financial and pharma stocks. Top performers during the last 12 months are Stara Planina Hold (5SR BU), First Investment Bank (5F4 BU) and Monbat (5MB BU).

Latest SOFIX rebalancing entails adding another industrial stock – Alcomet (6AM BU) as well as Eurohold Bulgaria (4EH BU). They would replace Industrial Holding Bulgaria (4ID BU) and Trace Group Hold (T57 BU). The rebalancing will become effective March 20th.

SOFIX – Top 20 Contribution to Return (Source: Bloomberg)

The expert explaining

“Two are the main reasons for SOFIX’ strong performance over the past 12 months and the corresponding 8 year high” – explains Tatyana Puncheva-Vasileva, Head of Research of ELANA Trading. “The first one is growing investors’ demand for blue chips on strong fundamentals from both institutional and individual investors. The second is cheap valuations”, said the expert.

She pointed out that institutional investors started adding blue chips to their portfolio in mid-2016 (August and September most visible). Then came the first ETF on SOFIX that fueled additional demand on the index constituents. Individual investors followed the trend as the market started moving up while they are urged to look for returns in this extremely low interest rate environment.

“Corporate results, on the other hand, were also good. Industrials were key contributors to the index growth together with financial and pharma stocks. All delivered excellent financial results, some above expectations excluding one offs. Accordingly, fundamentals were improving somewhat faster than valuations. Currently, even with the 40%+ rise, most blue chip stocks continue to trade at attractive multiples compared to peer companies and markets. Accordingly, SOFIX advancing 15-20% in 2017 looks achievable”, added Vasileva.

Finally, the analysts emphasized dividend yields remain in the 4-5% range for stocks in and out of SOFIX. “This is way above available deposit interest rates, thus, we expect equities to continue to attract yield seeking money”, Vasileva noted.

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