Institutional Investors Still Bullish on CEE
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The government crisis is over – what lies ahead for Romania?
Romania has experienced five turbulent months on the domestic political front. Nevertheless, after several prime ministerial candidates failed to secure parliamentary support, a new government was finally formed in late October. The Romanian equity market, which had performed strongly during the first half of the year, lost momentum towards the end of August and entered a downward correction in September. It then rebounded in October, partly reflecting the reduced risks of a snap election and a sovereign rating downgrade to below investment grade. While domestic political tensions have subsided, the BET index has yet to recover to the vicinity of its August peak. At the same time, Romanian equities no longer appear particularly inexpensive from a valuation perspective.
Commodities - Technical Analysis
Signs of a turnaround have emerged for gold and silver, and a strong upward move could trigger the next upward wave. A breakout above the key downtrend lines could also be on the horizon, which would further reinforce the positive turnaround. The price of oil has broken below the 100-day moving average, weakening the bullish outlook, and with the uptrend broken, it has entered a correction phase. Natural gas is showing a correction following a sharp decline, but has not yet managed to break through its downtrend line. Copper continues to trade within a wide range and is approaching the lower end of that range. Following a significant decline, wheat and corn prices have reached key support levels from which an upward correction—or even a new uptrend—is likely to begin.
Over 30 senior financial professionals, active in CEE markets and managing more than EUR 6.5 billion in assets under direct control, participated in our Institutional Investor Survey. Here, we highlight the most notable insights.
Respondents taking higher risk relative to benchmark in equities and favoring EM and CEE exposures over the next 3 months. Institutional sentiment on CETOP country performance shows a clear rotation in expectations. Poland strengthens as the top pick for outperformance, while Hungary also gains traction.
The survey shows a clear shift toward neutrality on Max Index duration positioning as participants weigh two offsetting forces: (1) the government’s decision to raise the budget deficit target, which pushed yields higher from early November and increased perceived risk, and (2) elevated purchases of government bonds by Hungarian banks to reduce extra profit tax, which supported the demand side and helped stabilize yields.
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