Brokers: 2008 - More IPOs, More Investors, Lower Profitability

Brokers: 2008 - More IPOs, More Investors, Lower Profitability

It is almost the end of a very successful year for the Bulgarian Stock Exchange. asked three brokers about their expactations of 2008. Here is what they had to say:

Razvigor Hristov, investment consultant, KD Securities

After Bulgaria's accession to the EU, a stronger foreign interest was felt on BSE. Another positive thing this year was the rising assets of pension and mutual funds, which, after posting record returns, established themselves as a very attractive type of investment.

2007 will also be remembered for the large number of new companies debuting on the stock exchange. Trade with the stock of most of them started very successfully, which created the impression that this is a 100% safe method to raise cash. Later on, a lot of people found out that every rule has its exceptions.

We must not forget to mention the 5% reduction of the corporte tax to 10%, which is among Europe's lowest.

Many companies, which had not been interested in the stock exchange previously, turned to it to increase their capital with the aim of financing investment projects. Of course, they had to show good financial results first.

As a whole, the year was very profitable for all who were in before November. After the euphoria, criticism started to pour. Opinions about the overrating of the local stock market started to circulate in the press and led to an inevitable slow-down. Many foreign investors decided to abandon Bulgarian stocks amidst opinions that they carry too much risk.

The correlation between BSE and international capital markets will increase in 2008. In my opinion, the higher liquidity on the local market will attract many foreign institutional investors.

Many companies have scheduled their bourse debut for 2008, so investors will have to be more selective. Road construction companies will continue to be a center of attention, as the Eurofunds will be pouring a lot of cash in infrastructural projects.

In the financial sector, the insurance market appears as holding the most potential.

As a whole, the market's liquidity and the number of investors will continue to grow, but repeating 2007 return levels is unlikely.

Nadya Nedelcheva, analyst, Karoll Capital Management

2007 was a very dynamic year for BSE. In the past 12 months we saw the formation of several tendencies, which I expect to gather pace in 2008.

Unlike previous years, the correlation between BSE and the international markets seemed stronger in 2007, and I believe the foreign factor will be an even stronger influence next year.

One of the tendencies established in 2007 was that many companies started to prefer the stock exchange as a method of raising capital. However, with the numerous IPOs to come, investors will become more picky.

My expectations of the upcoming several months are of preserving the positive trend and rising interst on the part of both investors and issuers. However, I expect slower growth this year.

Konstanitn Abrashev, portfolio manager, BenchMark Finance

2008 seems to be a promising year for BSE. The launching of Xetra creates new opportunities and stipulates portfolio reevaluations, as well as increased correlation between the Bulgarian market and the other markets in the region.

I expect many very interesting IPOs of large Bulgarian companeis.

I don't think prices will be increasing with the same pace as in 2007. I expect the average monthly return in indexes to be around 2-3%.

This article is not a recommendation for buying or selling stock.

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