Performance of FIC stocks in financial crisis

The leverages of this issuer array are the varied participations in many sectors of Romanian economy, as well as a positive liquidity.

Given the diversity on sectors, the evolution of FIC basket can be considered as a response to general economic evolution, and as, at least in theory, the capital market is a barometer for economy, FICs may be considered as benchmark shares for the situation of the capital market, and this combined with the good liquidity of the stocks”, Andreea Gheorghe, head of analysis department at Intercapital Invest told Wall-Street.

The five financial investment companies don’t have the biggest capitalization, but the value of the free-float is equal to the capital structure, which is not very often among other issuers.

“If an investor intends on buying FIC shares, given the 1% stake limit of the common capital, the top value of his portfolio to buy FIC shares is now at 12.5 million lei. The money could be very well invested on a specific period of time, as long as the traded volumes allow it. 12.5 million lei is actually a large amount compared to the money that could be invested in many other stocks”, said Andreea Gheorghe.

This feature is very important in investment process, especially for foreigners.

If in the bullish trends of the stock exchange, the five financial investment companies rendered the best returns of all listed issuers, in times of crisis, they had the biggest depreciations. Thus, at the end of last year, BET-FI indice was suffering an 83 percent loss from the first day of trading in 2008. Of all five FICs, FIC3 had the biggest loss, namely 88.37%, while FIC4 was falling 73%.

“It seems that the risk theory applies in practice, the return expected from an investment in an asset is comparable to the assumed risk. You can boost your incomes, as much as they could decrease if certain risk factors would take effect, and in 2008, the stock exchange, including FICs had all the necessary ingredients to collapse. For the moment, the bearish trend remains, and therefore, the forecasts for FICs haven’t changed either”, Intercapital’s analyst pointed out.

Another important aspect concerning the portfolio of the five financial investment companies is that they are no longer evaluated at equal multipliers to those used a year earlier, and the market value dropped significantly.