Wednesday, June 8, 2016

Romania post strong first quarter growth

Link:

Thus, with a GDP increase of 1.6 percent during the first quarter over the previous one, Romania leads by a detached 0.7 percentage points over Cyprus, which comes in second. Our country’s strong advance was brought on by recent wage increases and some fiscal loosening measures, which in turn stimulated domestic consumption.

Private services had the largest contribution to GDP growth in terms of supply, with wholesale and retail sales, transport and tourism contributing 2.1 percentage points after an increase of 13.1 percent y-o-y (18 percent share in GDP formation), shows a report by ING’s chief economist Ciprian Dascalu. The IT sector also added 0.6 percentage points due to an increase in activity of 7.6 percent, contributing 6.1 percent to GDP formation.

“This is confirmation of very strong domestic demand after successive administrative measures to boost disposable income, pointing to medium-term inflation risks,” the ING economist points out.

In the meantime Fondul Proprietatea, our Romania focused closed end fund, has actually declined around 10% since I bought it last year. Nevertheless, this is a classic case of value investing. The net asset value of the company is over 30% higher than the current share price. The fund managers have a mandate from large shareholders to close the gap. They have been consistently buying back shares week after week as reported on the funds home page each week. At some point this will have an effect on the share price. In the meantime we collect a 5% dividend and wait for the market to recognize the value and reprice the shares upward. 

We also have optionality as a large part of Fondul's assets are not publicly traded companies. I suspect that once these are taken public or sold outright that a tremendous amount of value could get unlocked. 


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