Although there is a certain enthusiasm about choosing individual stocks listed on the Bucharest Stock Exchange – sometimes it is better to consider an ETF. By doing so, you will often invest in a basket of selected stocks in a variety of markets and sectors.
With net assets of almost $1B, The iShares MSCI Frontier and Select EM ETF (FM) is the largest exchange-traded-fund that seeks to track the investment results of an index composed primarily of frontier market equities along with select emerging market equities.
The fund can be suitable for Romania and foreign investors who want liquid and diversified exposure to a basket of 7 top companies listed on the Bucharest Stock Exchange.
Why invest in the Bucharest Stock Exchange via FM ETF?
- Liquid and diversified exposure to frontier and emerging market stocks, including Banca Transilvania, Petrom, Romgaz, BRD, Transgaz, Electrica, Teraplast, and more.
- Gain access to a virtually untapped investment opportunity starting at as low as $100.
- Open trades in any direction or use leverage to hedge your BVB stock portfolio.
Investing in Bucharest Stock Exchange via FM – Key Facts
Are you looking for a way to gain exposure to the Bucharest Stock Exchange? When the iShares MSCI Frontier and Select EM ETF (FM) launched in 2012, investors gained an easy way to access broad exposure to frontier and emerging markets. The fund is a market-cap-weighted index that tracks the broad-based index composed of equities listed on the Bucharest Stock Exchange (known as BVB shares) and other frontier and emerging capital markets. The ETF is traded on the NYSE and is an iShares product powered by BlackRock.
The Fund seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of the value of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of issuers economically tied to frontier markets and issuers economically tied to emerging markets, or in depositary receipts representing such securities.
On or around June 1, 2023, the fund’s investment objective, name, and principal investment strategies will change. The fund name will change to iShares Frontier and Select EM ETF. As a result of these changes, the fund’s adviser will actively manage the fund rather than seek to track the performance of an index.
In selecting investments for the Fund, BFA uses optimization techniques relative to the Benchmark to provide exposure to frontier markets and select emerging markets while considering, among other things, regulatory requirements, market limitations, and repatriation restrictions as determined by BFA. As a result of the optimization techniques, the performance of the Fund may materially differ from that of the Benchmark.
Cost
The fund's expense ratio comes in at 0.80%. This is lower than average for both the miscellaneous region category and what investors typically expect from an ETF or mutual fund tracking a tier-weighted index of stocks mainly from frontier markets and, to a lesser degree, emerging countries.
Assets under management, Liquidity, and Institutional Adoption
FM is approaching $800M in total AUM (assets under management). The fund saw outflows in 2022, less than 1% of AUM - an impressive feat considering how challenging the year was for the stock market.
The average daily share volume over the last 30 days exceeds 167,745.00 shares with an average spread of 0.08%. Liquidity should not be a concern.
Performance
The average annual total return since inception is 3.4% (USD), while the 3y total return is 7.43% - an impressive return considering how challenging 2022 was. The cumulative total return stands at 42.29% since inception.
2021 was the best year for the ETF with a total return of 22.61%. The Bucharest Stock Exchange close 2021 up 33%, but RON lost around 10% versus the USD.
Sector Weights and Holdings
The financials comprise around 40% of the fund, followed by around 10% allocation to materials and real estate, and modest allocations to consumer staples, energy, communications, industrials, utilities, and derivatives.
The top 10 holdings are:
- JSC KASPI KZ GLOBAL SPONSORED REG (KSPI) - 5.49%
- COMMERCIAL INTERNATIONAL BANK (COMI) - 3.96%
- HOA PHAT GROUP - 3.63%
- JOINT STOCK COMMERCIAL BANK FOR FO (VCB) - 2.94%
- PETROM SA - 2.71%
- VIET NAM DAIRY PRODUCTS - 2.65%
- VINGROUP - 2.60%
- BANCA TRANSILVANIA SA (TLV) - 2.59%
- MASAN GROUP CORP - 2.35%
- VINHOMES - 2.33%
Growth and Valuation Metrics
Relative to the category and index, FM boasts a higher sales growth percentage, cash flow growth percentage, and book/value growth percentage. This is at the cost of higher valuation multiples, but with a modest P/E of 8.54, there is still plenty of room for future expansion.
The Price to Book ratio is 1.42%, while the distribution yield is 3.09%, according to ishares.com.
FM holdings listed on the Bucharest Stock Exchange
FM is the international ETF with the largest exposure and number of stocks listed on the Bucharest Stock Exchange. Sorted by weight, these are:
Petrom SA (BVB: SNP) - 2.71%
OMV Petrom S.A. is the largest energy company in South-East Europe, with activities in Exploration and Production, Refining and Marketing, Natural Gas, and Electricity. The company's shares have been traded on the Bucharest Stock Exchange under the stock symbol SNP since 3 September 2001.
Banca Transilvania (BVB: TLV) - 2.59%
Banca Transilvania S.A. provides various banking products and services. Founded in 1993, Banca Transilvania S.A. was listed on the Bucharest Stock Exchange in 1998 with the ticker TLV. Banca Transilvania is one of the best Romanian stocks in 2023 with a price increase of over 20% during the first three quarters.
Banca Transilvania Stock Price ForecastTransgaz (BVB: SNP) - 0.33%
Transgaz is a state-owned company, which is the technical operator of the national natural gas transmission system in Romania. On 26 November 2007, Transgaz issued an IPO on the Bucharest Stock Exchange aiming to earn around US$84 million for developing on the local market and abroad but at the end of the IPO offer the company earned a total sum of US$2.52 billion making it the largest IPO on the Bucharest Stock Exchange.
SNGN Romgaz SA (BVB: SNG) - 1.15%
National Natural Gas Company Romgaz SA Mediaș (SNGN Romgaz SA), or simply Romgaz is the largest natural gas producer in Romania and one of the largest producers in Eastern Europe. S.N.G.N. Romgaz S.A. was listed on the Bucharest Stock Exchange (BVB) and on the London Stock Exchange (LSE) on November 12, 2013. As of this date, the Company's shares are traded on the regulated market administered by the BVB, under the symbol "SNG".
BRD Groupe Société Générale (BVB: BRD) - 0.50%
BRD Groupe Société Générale is a Romanian bank with headquarters in Bucharest, Romania. Founded in 1923 and listed on at Bucharest Stock Exchange on 15 January 2001, BRD stock (BVB: BRD) is now one of the top holdings in the largest Frontier and Emerging Markets ETFs (FM).
TeraPlast SA (BBV: TRP) - 0.12%
TeraPlast SA is the parent company of TeraPlast Group - one of the largest Romanian manufacturers of construction materials. TeraPlast SA has been listed on the Bucharest Stock Exchange since July 2, 2008, under the ticker TRP, while its shares are included in the FTSE Russell SmallCap, AllCap indices.
Societatea Energetica Electrica S.A (BVB: EL) - 0.28%
Societatea Energetica Electrica S.A., together with its subsidiaries, engages in the operation, construction, and maintenance of electricity distribution networks in Romania. In 2014, 51% of the shares of Electrica SA were double listed on the London Stock Exchange and on the Bucharest Stock Exchange. It was the biggest listing on the capital market in the country. The company collected at the time a record of almost LEI 2 billion (EUR 443 million).
Med Life SA (M) - 0.30%
MedLife is a leading private healthcare provider in Romania. The company operates the largest network of clinics, one of the largest networks of medical laboratories, general and specialist hospitals and has the largest customer base for preventive health packages in the country. In terms of sales, the company is one of the largest private healthcare companies in Central and Eastern Europe, according to MedLife Group's public information.
Societatea Nationala Nuclearelectrica S.A. (BVB: SNN)
SNN is the only producer of nuclear energy in Romania and of the fuel related to the technology used, CANDU 6. Founded in 1998 through the reorganization of RENEL, the company is under the authority of the Ministry of Energy, with Romanian State holding 82.49% of the shares, while other shareholders own 17.50% of the shares after going public in 2013.
One United Properties Shares (BVB: ONE)
One United Properties stands as a leading green investor and developer of residential, mixed-use, commercial, and office real estate in Bucharest, Romania. Company's purpose is to create thriving, sustainable communities by developing state-of-the-art, energy-efficient buildings and to drive enduring value growth for its stakeholders.
How to trade BVB stocks via FM - Steps
In order to start trading stocks listed on the Bucharest Stock Exchange via FM, follow the steps below:
1. Sign up with CAPEX.com
No one can trade on the stock exchange directly, brokerage firms being the only ones that can offer access to the markets. If you are in Romania, choose an authorized company that is in the records of the Financial Supervisory Authority. A complete list of these companies can be accessed on the ASF website, after which you will have to choose the option SECTIONS > Entities that provide investment services and activities in Romania.
One of the registered firms is KEY WAY INVESTMENTS LTD NICOSIA SUCURSALA BUCURESTI, which operates one of the leading trading platforms in the world, CAPEX.com.
2. Open a trading account
Once you have chosen the broker, you will need to open an account with it. Opening an account with a brokerage firm is akin to opening a bank account, with many firms offering the possibility of opening an online account.
With CAPEX.com you can open a Trading Account to gain access to 2,100+ leveraged products on shares, commodities, indices, cryptocurrencies, bonds, currency pairs, and ETFs, including iShares MSCI Frontier and Select EM ETF (FM).
You can also open an Invest Account and buy 5.000+ shares with ownerships listed on 10 global stock exchanges.
3. Fund your account with money
Trading on the stock exchange is no longer an activity that only the rich can have access to. Today there are many companies that allow you to start investing with little money. With CAPEX.com you can deposit as low as $100 to open an account.
Once you have funded your account with an amount of money, you will be able to start trading on the stock exchanges.
4. Inform yourself and understand the financial instruments in which you invest
Do not confuse stock market investments with gambling. If you treat the stock market as a bet and if you invest in companies or financial instruments that you know almost nothing about, you will most likely lose money. However, if you invest in the Saudi stock market through an investment fund that tracks a stock index like MSCI Frontier and Emerging Markets Select Index (USD), in the long term you will have more chances to take advantage of the historical positive returns.
Since ETFs are more diversified, they tend to have a lower risk level than stocks. Like stocks, ETFs can be bought and traded at any time.
5. Choose your timeframe and open your position
Timeframes are important considerations when you’re deciding how to take a position on stocks.
Each Japanese candle presents the price action over a specific period, or to use traders’ jargon, a time frame. Most trading platforms’ charting modules allow you to view candles representing time frames ranging anywhere from a minute to a month.
The trend, meaning the overall price direction, that you’ll see on any chart depends greatly on your time frame. The longer the chart’s time frame, the more established and reliable the key price levels and other support/resistance indicators.
The 10 timeframes available on our award-winning platform enable a comprehensive detailed analysis of all minor price movements. More than 80 technical indicators and analytical tools, including graphic objects, provide detailed analysis of quote dynamics.
Should you invest in the Romanian Stock Market right now?
Before you consider investing in the Saudi Stock Market, you'll want to hear this.
If you're starting on your investing journey (or if you want a sanity check), please read through our how-to-invest in stocks guide. It goes through all the basics, from how to get started to how to determine your personal investing strategy, to how much of your money to invest in stocks.
Although analysts are bullish on the top Saudi stocks, they might not all be the best choices for investors who don't yet have established and diversified portfolios. Even the most stable companies on this list aren't immune to volatility in their stock prices, especially over short periods.
For this reason, if you're just getting started, you'll also want to consider a well-diversified option like the iShares MSCI Saudi Arabia ETF (NYSE ARCA: KSA).
Free resources
Before you start investing in the best stocks for your portfolio, you should consider using the educational resources we offer like CAPEX Academy or a demo trading account. CAPEX Academy has lots of courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader or make more informed investment decisions.
Our demo account is a suitable place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how CFDs work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading.