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Press release OTP Asset Management has launched an analysis of the evolution of financial markets, "Spring-Summer Trends 2019" 2018 in retrospect: from synchronized growth to unbalanced growth

Bucharest, April 11th, 2019 – OTP Asset Management Romania respects its promise to be transparent regarding the investment decisions and publishes the market analysis "Spring-Summer Trends 2019", the third volume presenting the retrospect of the evolution of financial markets during 2018 and the company's expectations for the next period.

 

Also, OTP Asset Management Romania SAI SA announces the distribution towards the investors registered, at 1st of April 2019, in the OTP Real Estate & Construction fund unit holders Registry, of the dividend (distributable income) for the first quarter of 2019, amounting to 3,55492759 lei per fund unit. The fund performance in the first quarter was 8.55%.

 

The main ideas regarding the financial market’s evolution are the following:

  • - 2018 in retrospect: from synchronized growth to unbalanced growth;
  • - Large scale economic downturn, but no recession (yet);
  • - GDP growth may slow down to up to 3%;
  • - Volatility of financial markets, most likely high during 2019;
  • - Estimates for the end of the year indicate values of the main international stock indices above current levels.

 

Starting with 2019, the era of ultra-relaxed monetary conditions seems to have ceased.  Higher interest rates in the US and appreciation of the dollar have led to tighter financial conditions around the world, generating negative effects of contamination, especially in emerging economies with weaker economic grounds, such as Argentina or Turkey.

 

The trade tensions between the two largest economies of the world, the US and China, have provoked headaches for investors in financial markets and have started to threaten the global economy growth. At the same time, the British saga on Brexit and the Italian budget problems have created additional worries in Europe. All of these factors have fuelled fears regarding the global downturn in the global economy.

 

The Eurozone also saw an unexpected slowdown amid fears about Brexit, but also due to production difficulties in the automotive industry or mass "yellow jackets „protests in France.

 

Considering this context, in our baseline scenario, we expect that during 2019 the economic growth rate will continue to diminish in all key world economies, without entering a real recession this year. Moreover, we believe that a future recession may be less severe than in 2008.

Concerning Central and Eastern Europe, we believe that strong domestic demand, fuelled by favourable labour market conditions, as well as European funds, can provide sufficient support for robust growth this year, but a slowdown is to be expected due to the weaker Euro area economy.

 

Regarding Romania, we expect a GDP growth of 3% in 2019. Similar to previous years, household consumption could be the main driver of economic growth.

We expect investment to grow moderately in 2019, as the positive effect of European funds absorption and pressure on companies to improve productivity could be partly offset by lower investment in the energy, telecom and financial sectors.

 

The current level of the NBR benchmark interest rates, together with prudent liquidity management, could remain at the same level in 2019. However, in the medium term, a modest increase in the interest rate may be necessary to keep inflation well connected to the target.

 

Pro-cyclical and unorthodox fiscal policies, as well as the relatively high and rising current account deficit, signal the build-up of vulnerabilities. Therefore, it is expected that the NBR will remain very vigilant.

 

With regard to developments in global financial markets, we believe that 2018 marks the entry into the last phase of the economic cycle. We stand by our view that globally there is still a place of economic growth, but limited, on the current cycle. For this reason, we prefer sovereign quality bonds (investment grade), against corporate ones.

In the current context, liquidity is extremely important, so we recommend giving up liquidity selectively, only for extremely attractive returns and under controlled risk conditions.

 

We are optimistic about the evolution of the RON bond funds in the coming period, given the opportunities offered by EURRON swaps.

 

The evolution of global stocks during 2019 seems to be driven by the results of the trade war between China and the US. We believe volatility will remain at high levels in 2019, due to the fact that the US is at the end of the economic cycle, with political and macroeconomic risks rising globally. We believe that in the next few years, stocks from companies with a strong balance sheet (Value type) will over-perform at the expense of growth companies.

 

The local capital market will remain heavily influenced by two extremely important factors. On the one hand, the projected budget deficit for 2019 will make the majority shareholder of state-owned companies demand generous dividends, again, from these companies. On the other hand, the implications of modifying the current functioning system for Pillar II of privately administered pensions are very difficult to quantify right now, but if the current form will be drastically modified, there will be negative effects in the short and medium term. Under these circumstances, it is expected that Romania’s goal of moving to emerging market status will go away indefinitely.  

 

Commercial war and populist slippages are the main threats for financial markets during 2019.

 

OTP Real Estate & Construction distributes dividends of 3.55 lei / fund unit

Also, OTP Asset Management Romania SAI SA announces the distribution of the first quarterly dividend to the investors of the OTP Real Estate & Construction Fund. The payment is due to all investors registered in the Unitholders Register on April 1, 2019. The amount of the distributable income for the first quarter of 2019 is 3,555492759 lei per fund unit.

 

The return of the open-end investment fund OTP Real Estate & Construction, the only diversified investment fund in Romania offering exposure to global real estate markets, was 8.55% in the first quarter of 2019.

The next time the fund is registered for revenue distribution is July 1st, 2019.

 

 

About OTP Asset Management Romania SAI S.A.

Present on the local market in 2008, OTP Asset Management Romȃnia SAI S.A. is among the most important investment fund managers in Romania, according to the assets under management. The company manages a diversified range of investment funds, offering the possibility to acces stocks investments through OTP Expert, OTP AvantisRO, OTP Global Mix, OTP Real Estate & Construction, OTP Premium Return and OTP Euro Premium Return, as well as investment in securities  and state bonds through OTP Obligațiuni, OTP Euro Bond, OTP Dollar Bond and OTP ComodisRO. Currently, the company serves more than 7,300 retail investors and corporate clients in ten open-end investment funds.

 

About OTP Bank România

 

OTP Bank Romania, subsidiary of OTP Group, is an integrated and self-funded provider of financial services. With an approach based on responsibility, commitment and professionalism, OTP Bank Romania understands its clients' needs and the current market context, being a reliable partner in the area of financial services. The bank ranks 9th by assets in the top of Romanian banking players, as of September 2018.

 

OTP Group celebrates, in 2019, 70 years of existence, while the Romanian subsidiary marks 15 years of presence on the local market. By today, OTP Group has grown into a dominant player in the Central-Eastern Europe market and is regarded as a major banking group even on European scale. The community of around 36 thousand OTP staff serves over 18.5 million customers in 9 countries on a daily basis.

 

The Right to Education Foundation supports and promotes the development of financial, economic and managerial skills among pupils aged between 10 and 18 years of age and provides young psychological tools for conscious career planning. All modules of economic and financial education aim to acquire the financial alphabet based on the Edutainment methodology, in a language appropriate to the age of young people.