BETting On Romanian Equities

Having highlighted attractive technical pictures in a number of eurozone equity markets, most recently through adding a bullish Spanish Small Caps view to our Asset Class Strategy (see Business Monitor Online, 'Equities: Bullish Small Caps', September 16), we now turn our attention to emerging European equities, where we believe Romania's BET equity index offers significant potential.

Our previous view that Romanian stocks would head modestly lower over the short term has played out (see 'Equity Rally Looks To Be Over', August 21), with the index losing 2.6% since August 21. Romania's new precautionary loan agreement with the EU/IMF was priced into markets, and there has been a regional pullback in stocks.

However, we would now be tempted to adopt a bullish stance towards the BET index if the bourse breaks through a key level of long-term technical resistance at 6,000. Romania's improving economic outlook and exposure to the German domestic demand story should increase the earnings potential for a number of Romanian stocks. While we note that the country's banking sector continues to look shaky, a break through the above-mentioned resistance level would imply that investors are willing to overlook these concerns for the time being.

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