Study: BVB Investors Became More Cautious in 2024, Favoring Stable Stocks Amid Market Volatility
Cornerstone Communications, a local consulting firm specializing in investor relations and capital markets advisory, together with MIA Marketing, a Romanian market research company, and in collaboration with BT Capital Partners, have finalized the 2024 edition of the Market Pulse study, dedicated to the capital market and the behavior of retail investors in Romania. The research was conducted between September and November 2024 on a sample of 453 individuals, focusing on the investment habits of local retail investors with exposure to companies listed on the Bucharest Stock Exchange.
“Understanding the behavior of investors on the local market is crucial for analyzing how they adapt to new economic and political realities. The 2024 Market Pulse study highlights a significant shift in retail investors’ strategies, marked by a preference for low-risk assets such as bank deposits and government bonds. This preference was driven not only by the desire to limit risk exposure but also by the evolution of inflation in Romania, which provided investors with a more predictable economic context. Experiences from 2020 and 2021, when numerous entrepreneurial companies entered the capital market without being fully prepared for this step, as their subsequent results demonstrated, have led investors to adopt a more analytical approach. 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 at the time of the research. Regarding the markets where their shares are listed, 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. This trend is also reflected in the portfolio value distribution between the two markets, with the Main Market and AeRO Market accounting for 76%-24% in 2024, compared to 63%-37% in 2023.
“This year’s study highlights a trend toward diversifying the investor base on the capital market. The increase in the share of participants with portfolios under 10 thousand lei 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. This phenomenon contributes to a more diverse market structure and reduces reliance on traditional investors with significant portfolios. 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. Additionally, the frequency of transactions has decreased, with investors choosing to hold shares for longer periods, signaling a shift toward long-term strategies and greater confidence in selected companies. Although the rising cost of living has led to a decline in the share of annual income invested, investors’ main activity remains focused on stock acquisition. This demonstrates that for many, investing has become an integral part of their lifestyle, a positive sign for the stability and development of the market, without significant exits by retail investors,” stated Ciprian Zamfirescu, Partner at MIA Marketing.
Regarding the reasons for investing at the BVB, these have remained relatively constant compared to the previous edition of the study. Thus, 71% of investors 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 became 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). Compared to the previous edition of the study, the company’s profitability trend gained the most importance, while financial results from the last year replaced the founder’s or entrepreneur’s reputation in the top five criteria.
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%). Compared to the previous edition of the study, the top five reasons remain the same, although their order differs, with lack of trust in the company’s management being the primary reason for not investing in 2023.
Regarding the total portfolio value, 14% of investors hold investments below 10 thousand lei (vs. 3% in 2023), 19% have portfolios valued between 10 thousand and 50 thousand lei (vs. 16% in 2023), and 18% hold portfolios between 50 thousand and 100 thousand lei (vs. 9% in 2023). The most representative range remains between 100 thousand and 500 thousand lei, with 26% of investors falling into this category (vs. 34% in 2023). Large portfolios, with a total value between 500 thousand and 1 million lei, account for 10% (vs. 14% in 2023), while portfolios exceeding 1 million lei represent 14% (vs. 26% in 2023), showing a lower share compared to the previous edition of the study. In terms of when the decision to invest in the BVB was made, most respondents (41%) mentioned that they first invested in the stock market more than ten years ago, a percentage that remains constant compared to the previous edition of the study. 15% of investors made their first investment 5-10 years ago (+3pp vs. 2023), 17% have 3-5 years of experience (+4pp vs. 2023), 16% started investing in 2022-2023, and 11% began their stock market activity this year.
“The data collected from investors shows several trends that are useful for understanding both their plans for the financial investment segment and their behavior regarding local issuers and the overall market evolution. We aim to help accelerate the learning curve of potential investors to adopt financial instruments such as stocks or bonds as part of their asset portfolios. We observe both an increase in the frequency with which clients enter the market, the growth of new investor segments that debuted on the stock exchange in recent periods, and the time they remain invested, all signaling positive developments in expanding the base of active participants in the dynamics of the local market. The general sentiment seems to be dictated by the predictability of income generated by financial instruments, as well as the aversion to complexity, which indicates, together with corroborated data regarding the penetration of financial services, an intermediate stage of market maturation and our need to continue supporting its development to attract new classes of investors with a higher risk appetite,” stated Vlad Pintilie, Deputy CEO of BT Capital Partners.
In terms of transaction frequency, an extension of the investment horizon can be observed compared to the 2023 study. The proportion of those who trade weekly or more frequently decreased from 18% in 2023 to 9% in 2024, while those who trade monthly declined from 43% in the previous edition to 32% this year. The frequency of transactions every 2-3 months remained constant at 21%. On the other hand, the share of investors who invest once a year or less increased from 5% in 2023 to 18% in 2024. Regarding the average holding period for a stock in the portfolio, 14% of respondents mentioned a period of less than one year (vs. 18% in 2023), 17% hold shares for one to two years (vs. 19% in 2023), while the proportion of investors holding shares for more than two years reached 69% (vs. 63% in 2023).
In the first nine months of 2024, investors maintained their investment plans compared to the previous edition of the Market Pulse study. Thus, 74% of respondents bought more shares than they sold, and 16% mentioned that the value of purchases and sales was approximately equal. Only 10% of investors had selling shares as their main activity in 2024. 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. This trend is also reflected in the investment proportion between the two types of stocks, reaching 54%-46% this year in favor of high-dividend stocks. This marks a reversal of the 2023 trend, when growth potential stocks were held by 61% of investors, while only 39% held high-dividend stocks. The average satisfactory return mentioned by investors showed a slight decrease compared to the previous edition of the study, from 15% to 13% in 2024.
The study conducted by MIA Marketing includes responses from 453 retail investors who, at the time of the research, had capital invested in the Bucharest Stock Exchange. Among the respondents, 14% are aged between 18 and 35, 33% between 35 and 45, and 52% are over 46 years old. Regarding education, 85% of participants have higher education degrees, while 13% are high school graduates. From an occupational perspective, 60% of investors are employees, 25% are entrepreneurs, and 15% fall into other categories (students, retirees, etc.).
The 2024 Market Pulse study was conducted prior to Romania’s presidential and parliamentary elections, which caused high volatility over a three-week period, marked by significant declines for most of the interval and a recovery in its final phase. This context was not anticipated by investors, with respondents identifying the major negative events impacting the end of this year as the recession in Europe (59%), political and economic instability at the European level (55%), the slowdown in Romania’s economic growth (53%), the global financial crisis (50%), and the escalation of the war in Ukraine (40%). However, the recent recovery of the BET index to its level prior to the political uncertainty demonstrates that investors remain confident in the local capital market, and the adopted investment strategies remain robust, validating the study’s findings.
Disclaimer: The study was conducted on a simple random sample of 453 individuals nationwide, comprising local retail investors with exposure to companies listed on the Bucharest Stock Exchange, which ensures a margin of error of up to 4.6% at a confidence level of 95%.
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About MIA Marketing
For over 30 years, MIA Marketing has been providing to the Romanian business community access to market research solutions through customized methodologies, for quantitative and qualitative studies. With a team of renowned marketers and analysts in the field of marketing, MIA Marketing has been involved throughout its existence in more than 2,000 analyzes and market studies conducted for local and multinational companies active in various economic sectors, such as FMCG, retail, health, telecommunications, IT&C, automotive, agriculture, media and financial services. MIA Marketing has been a member of ESOMAR since 1994.
About Cornerstone Communications
Cornerstone Communications is a boutique firm based in Bucharest, specialized in investor relations and capital market advisory. The company provides integrated communication and advisory services to companies that are already listed on the Bucharest Stock Exchange, as well as to entrepreneurial businesses that want to raise financing through the Romanian capital market. Cornerstone Communications is also an Authorized Advisor for BVB’s AeRO market.
About BT Capital Partners
BT Capital Partners is one of the largest financial investment services companies (SSIF) in Romania, operating as the investment banking and capital markets division of the Banca Transilvania Financial Group, specialized in brokerage services on the Bucharest Stock Exchange (BVB) and international markets, assistance for capital market listings and attracting investors, consultancy for mergers and acquisitions, raising and structuring complex financing, market research, and strategic consultancy.