The combined market cap of the shares traded on the Bulgarian Stock Exchange has retreated to mid-2006 levels, down a massive 10 billion leva since October 2007. The market cap of the nation's public corporations fell to 19.9 billion leva on August 4 to account for around 30 per cent of GDP, down from 56 per cent of GDP in late 2007.
The nine months of bear market are taking their toll on the blue-chip index SOFIX, which tracks the 19 biggest companies on the bourse. The index hovered around the 1000-point mark on August 4, dipping briefly below that psychological level, loosing over 40 per cent of its value so far in 2008.
News agency Bloomberg has reported that the Bulgarian stock market is among the top 3 worst performers in Europe this year. Analysts are reluctant to point to a psychological threshold that would trigger a turn-around.
Boris Bonkin, a portfolio manager at pension company Allianz Bulgaria, said the withdrawals made by mutual fund investors are further undermining the market which in turn leads to lower mutual fund yields that prompt further withdrawals.
The local mutual fund market, contracted by eight per cent in July with net assets falling to just below 800 million leva, shows data of the asset managers.
The decline in mutual fund asset value is 28 per cent for the first half of 2008. The market stood at 1.15 billion leva at the end of 2007.
Speculators have bailed on the market, leaving it to the long-term investors but the problem now is the low liquidity of the bourse, said Bonkin.
Stoyan Nikolov, a broker at First Investment Brokerage House, pointed to the increased bourse turnover as one indication that a reversal of the negative trend could be around the corner. He noted other potential turn-around signals as solid financial reports and the stabilisation of the commodities and FX markets.
Foreign investors could come to the rescue of the stock market, as they would increase liquidity and buying momentum, said Bonkin. However, the recent EU sanctions have dissuaded foreign buyers as they signaled a loss of confidence at the highest level.
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