Monday , March 20 2023

SOFIX has been at its level since early 2017


At 596 points, the blue chip SOFIX index is just 4 points from the lowest price since the beginning of last year. And while the value of the index is almost the same, many things have changed. We will now look at some of them.

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As for the composition of the indicator

Years and eight months later, the SOFIX index is different than it was, several companies have entered and moved out of it. In March 2017, Holding Varna and Trace Group Hold were added to the index, and Neochim and M + S Hydraulic withdrew from it.

And while M + S Hydraulic returned in the last two years just to get it back from the index to the last change, Neochim no longer has the power to return to SOFIX.

During the second rebalancing in 2017, Doverie United Holding, Industial Holding Bulgaria and Sirma Group Hold entered SOFIX, leaving Doverie as the benchmark for its latest change.

During the first SOFIX change this year, Trace Group Hold and Holding Varna returned to its members, who remain members until today.

And the last change at the benchmark since September of this year was linked to the entry of Elana AgroCredit as a new element of the index for the first time in its composition.

About the earnings of its components

One year and eight months is a fairly long period. For this, earnings from the components of the index (since its last refurbishment) are increasing, which in practice leads to an improvement in the economic estimates for the benchmark companies.

According to the latest figures, the earnings of the index companies at the end of the first six months on a consolidated basis increased by 9.3% compared to the same period last year. Soon, at the end of November, we will see again how the consolidated earnings for the first nine months of the year change. It is quite realistic to expect an increase of around 10%.

Improvements in financial results lead to a certain decrease in the price / earnings index traded in the SOFIX index. Currently it is at 10.44 and the cost-accounting value is at level 1.

And while a year ago, the same indices were 11.44 and 1 respectively, it has to be taken into account that since then it has dropped to 12%. That is, there is a significant improvement in the index's financial ratios at the moment, which makes it less attractive in terms of profits of its assets.

Compared to global indicators

The SOFIX index is at its levels since early 2017. Let's look, however, what are the trends of the top stock market indices worldwide, defining the direction of all stock markets around the world.

We will see the performance of many indicators for this period – the broader US index S & P 500, which represents more than 50% of the world's stock market capitalization, the DAX 30, representing the largest European economy and the neighboring Romania indicator as a direct competitor and "buy", which we can also define SOFIX.

Over the past two years, the large US state of the S & P 500 has risen by more than 20% despite last month's correction, which received almost 10% of its value.

The German DAX 30, largely similar to SOFIX, is currently trading at almost the same level as the beginning of 2017.

Perhaps investors will be more interested in understanding how the key indicator of neighboring Romania has been represented since the beginning of 2017. For the period when the SOFIX index showed zero growth, the BET index rose by 17.9%. For the last year, the return of the Romanian index is 21.2%, compared to the fall for the native – about 12%.

As a distance from the top

Obviously, the blue chip SOFIX chip is in the correction phase, since its peak in February of this year, the index gave more than 15%. For comparison purposes, the US S & P 500 is about 7% top and the German DAX – about 15%, informs

Closer to the top, the stock indices traded the Romanian index – about 5% below its biggest value this year.

And while investors may think that raising our Romanian competitor has made the BET index more expensive, that is far from being the case. The latter is trading at a lower price / profit ratio of 9.01, at 10.44 for SOFIX. The book value of BET is also quite attractive at 1.06.

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