Study: Investors on Bucharest Stock Exchange became cautious in 2024
In 2024, investors on Romania’s stock exchange showed a marked preference for low-risk assets such as bank deposits and government bonds driven by a more predictable evolution of inflation, according to a new study on investor behavior.
The preference change is part of the findings of the 2024 edition of the Market Pulse study, put together by Cornerstone Communications, a local consulting firm specializing in investor relations and capital markets advisory, together with MIA Marketing, a Romanian market research company, in collaboration with BT Capital Partners. The research was conducted between September and November 2024 on a sample of 453 individuals.
According to the study, Romanian investors who entered the market in 2020 and 2021 are now more mature.
“The study’s results show that investors are now much more attentive to companies’ fundamentals and the dynamics of the sectors in which they operate, both locally and globally. In this context, a pattern emerges: a preference for companies listed on the BVB Main Market, operating in robust sectors such as financial-banking and energy/utilities. These companies are valued for their financial and operational stability, as well as their ability to offer high dividends, becoming the pillars of investment strategies for capital market investors in Romania,” stated Zuzanna Kurek, CEO of Cornerstone Communications.
The study included investors with capital placed in shares of companies listed on the Bucharest Stock Exchange (BVB) at the time of the research. 65% of respondents stated that they hold shares listed exclusively on the BVB, while 35% own shares of companies listed both on the BVB and other stock exchanges. In this case, an upward trend can be observed among investors focusing solely on the local stock exchange compared to previous editions of the study, when the proportion was 39% in 2022 and 55% in 2023.
Investors holding shares listed on the BVB have diversified portfolios, adapted to the volatile economic context. Bank deposits increased from 42% in 2023 to 59% this year, with a similar trend observed for government bonds, accessed by 44% of investors compared to 34% in 2023. Investments in real estate (36%) and precious metals (8%) remained constant during this period, while only 18% of investors held bonds (vs. 29% in 2023) and 12% owned cryptocurrencies (vs. 20% in 2023).
Market Pulse study respondents stated that their portfolios include, on average, shares of 7 listed companies, compared to an average of 10 listed companies in 2023. 71% of participants hold only shares of companies listed on the Main Market, a significant change from the previous edition, when the share was 15%. At the same time, less than 1% of investors held only shares of companies listed on the AeRO Market, compared to 7% in 2023, while 28% owned shares listed on both the BVB Main Market and the AeRO Market, compared to 78% in the previous edition.
“The increase in the share of participants with portfolios under RON 10,000 (EUR 2,000) indicates that the market is becoming increasingly accessible to novice investors. These investors primarily focus on companies listed on local markets, where they perceive lower risks and benefit from greater accessibility,” stated Ciprian Zamfirescu, Partner at MIA Marketing.
“At the same time, investment behavior reflects an important shift: portfolios are becoming more concentrated, and the average holding period for shares is increasing, indicating an extension of investment horizons,” he added.
Roughly 71% of investors included in the study mentioned earning profit from their available capital as the primary reason, 70% invested to achieve a return higher than inflation, and 65% aimed to diversify their investments. Among the criteria mentioned by investors for selecting companies in 2024, the most important was the company’s profitability trend, rated at 8.6 out of a maximum of 10. The following criteria are professional management (8.3), the company’s development plans (8.2), financial results over the past three years (8.1), and financial results over the past year (8.1).
In terms of reasons not to invest in a company, respondents mentioned high debt levels (61%), lack of growth prospects (47%), lack of understanding of the company’s product or services (46%), lack of trust in the company’s management (41%), and lack of trust in the entrepreneur behind the business (40%).
Regarding the total portfolio value, 14% of investors hold investments below RON 10,000 (EUR 2,000), a jump from 3% in 2023; 19% have portfolios ranging from RON 10,000 to RON 50,000 (EUR 10,000); and 18% hold portfolios between RON 50,000 and RON 100,000 (EUR 20,000). The most representative range remains between RON 100,000 and RON 500,000 (EUR 100,000) with 26% of investors falling into this category (vs. 34% in 2023).
Large portfolios, with a total value between RON 500,000 and RON 1 million, account for 10% (vs. 14% in 2023), while portfolios exceeding RON 1 million represent 14% (vs. 26% in 2023).
Most respondents’ investments are concentrated in the financial-banking (84%), energy/utilities (72%), and oil and gas (64%) sectors, which have remained stable or experienced slight growth compared to the previous edition of the study. Regarding other sectors, most have recorded decreases in holdings compared to 2023, with the most significant declines in the IT&C industry, from 78% in the previous edition to 34% in 2024, and agriculture, from 57% in 2023 to 17% this year.
The majority of investors, 70%, prefer both high-dividend stocks and stocks with high growth potential, compared to 53% in the previous edition of the study. Additionally, the percentage of investors favoring high-dividend stocks remained constant at 17%, while those focusing on high-growth potential stocks decreased from 31% in 2023 to 13% in 2024.
(Photo source: Negotin8 | Dreamstime.com)
