ZF Today’s opening at the Stock Exchange. Ovidiu Dumitrescu, Investment: We need to talk…

♦ “You can have overvalued companies because certain assumptions are not justified” ♦ Energy transition and monetary policy, on the radar of investors ♦ Also to be taken into account is the trend of global trade relocation.

Against the background of the significant increases registered by international capital markets since the beginning of the year, investors are starting to question whether or not certain listed companies have become overvalued, an example of this being given by the tech sector in the United States, fueled by a year and half of the enthusiasm created around artificial intelligence, says Ovidiu Dumitrescu, Deputy General Director, Investimental. “You always have to talk punctually about overvaluation. Let’s not forget that we, in general, have lower multiples than outside. We see a graph the other day that, in the United States, especially in the technology sector, the price to earnings ratio (price to earnings ratio) multiple is higher than in the dot-com bubble at the end of the years ’90s – early 2000s”, says Ovidiu Popescu.

The representative of the newest brokerage house on the local stock exchange – which is preparing to launch a new ETF (exchange-traded fund) at the BVB together with the Croatians from InterCapital – was present at the first April edition of ZF Deschiderea de Atoje. The show is broadcast daily, from 09:30, on zf.ro and the Facebook and YouTube pages of Ziarului Financiar. The podcast can be listened to on Spotify.

“At some point, a market will go down and investors will start to be less optimistic about a company. Clearly, you can have companies overvalued because certain assumptions are not justified. This does not mean that, after a correction, those companies do not become a good investment, especially in a diversified portfolio”, continues Ovidiu Popescu.

On another note, the energy transition will remain one of the main topics addressed by global investors, closely followed by the relaxation of monetary policies, he adds. For example, in the United States, the main stock indices marked new historical highs after the representatives of the Federal Reserve (Fed – the American central bank) signaled three reductions in the benchmark interest rate in 2024. “We currently have the Japanese yen at a minimum of the last 30 and some years, even though the central bank of Japan has given up the zero interest policy that it has maintained for about three decades. It becomes interesting because, if at some point, the yen starts to appreciate, a lot of speculative investments are financed in yen, and this could become a brake on the ability of the American stock market to grow spectacularly.”

After a 34-year hiatus, the Tokyo Stock Exchange’s Nikkei 225 index hit a new all-time high in late February, as investor interest in Japan’s capital market grew as international investment funds left the People’s Republic of China. On the other hand, Japan recently lost its title as the world’s third largest economy to Germany and entered recession after a 0.4% decline in Q4/2023, coming after a revised decline of 3 .3% in the previous quarter.

“At the same time, we will see the part of deglobalization or relocation, a trade-off between an external partner that offers you high production costs, but with a long logistics chain, and a local partner that offers you higher costs, but you don’t have to think that some rebel from some strait might get mad at the world and the delivery would take two weeks longer. You could thus receive penalties from your partners because you could not deliver further”, says the representative of the brokerage company.

What Ovidiu Dumitrescu says about the highs recorded by the local Stock Exchange:

► I think it’s important to say the very broad context. We are currently in a Goldilocks period of policy, meaning we have falling rates. We did not have a strong economic shock, as the world expected due to rising interest rates.

► It does not mean that people did not suffer, that companies were not found insolvent or things like that. But at the level of the economy, there was no catastrophe like 2007-2008. Then, the stock markets feel that they have room to run.

► Obviously, there are always concerns, it is said that rising markets are climbing a wall or a mountain of worries. There will probably be more corrections, no one knows for sure. But we can be happy, BET is at 17,000 points and it is a positive thing. Beyond the global context, the local context is also positive because there are still impressive dividend yields.