The Bulgarian Stock Exchange (BSE) brought fresh disappointment to investors banking on a swift recovery, mirroring the performance in most global markets.

For a second session in a row, Bulgarian indices pointed lower, with SOFIX of the blue chips and Dnevnik 20 of the biggest and most liquid stocks dipping more than 1%. Only BGREIT of the property funds bucked the trend to make it into positive territory.

Fuel distributor defied the downturn that sank others stocks with a solid rally.

Trading volumes lapsed back to less than BGN 1 million.

The bearish mood swept over markets around the globe, with developing markets plunging to their lowest in a month. The MSCI Emerging Markets Index slipped by 1.1% on Thursday thanks to Russian index Micex, which shed 2.3%.

The better-than-expected 9% recovery in the Chinese economy in the third quarter also failed to give markets a bounce amid growing speculations that Beijing will move on to wind down its fiscal stimulus. In addition, the sliding oil is dampening profit outlooks for producers of energy raw materials.

“We may no longer see money lying around everywhere as China and other countries are thinking about ending the stimulus,” Peter Westin, chief strategist at the Moscow-based brokerage Aton LLC, told Bloomberg. “This should mean a correction as this year’s rally in global markets is basically liquidity-driven.”

European markets moved in lockstep with Wall Street, where a bunch of worse-than-expected earnings reports brought investors back to stark reality.

(Dnevnik)

A group of bondholders of Bulgaria’s steel behemoth Kremikovtzi have urged the government to shut down the ailing state-run plant before winding up its businesses and offloading its assets.

At a meeting with economy minister Traycho Traykov and his deputy Evgeni Ivanov, bondholders proposed that the asset sale should be open to all types of investors including scrap and property businesses as well as steelmakers that would buy the assets without the plant’s mountain of debt.

Bondholders claim they hold bonds worth a nominal EUR 91 million, or 28% of the issuance. They have singled out liquidation as the only possible solution involving no extra costs for the state and private creditors.

Back in August, at a meeting with prime minister Boyko Borissov, finance minister Simeon Djankov and Traycho Traykov, another group of Kremikovzti’s bondholders put forward a rescue plant for the struggling company. The government said it could only greenlight the proposal if a major international company is attracted as a strategic investor.

Bondholders, which are now the biggest creditors of the insolvent steelmaker, divided on whether they should try to bring the plant back on its feet or sell its asset back in the spring but the feud only surfaced in July.

The rescue plan authored by administrator Tsvetan Bankov calls for converting bondholders’ claims into equity capital, a change in the terms of the bond contract, so it needs the nod of investors holding 75% of the issuance to pass.

(Dnevnik)

Interest in T-notes of the Bulgarian government by pension and mutual funds has increased only slightly in the recent months despite high orders at auctions, portfolio managers told Dnevnik.

The Finance Ministry announced recently that due to strong interest, it will action off on October 28 an additional BGN 30 million T-notes maturing in February 2014.

According to the statement, auctions in September and October generated intense interest with both banks and pension funds, mutual funds and insurers. Orders for T-notes with a five-year maturity submitted at the last auction exceeded the offering almost fourfold and coverage was the highest since December 2007.

Analysts pinned the bulk of the interest on banks that could afford to spend heftier amounts.

Ivo Zahariev, portfolio manager at pension fund DSK Rodina, explained that at the moment funds have better options in terms of risk/return than government debt. He attributed the numerous orders at the lat auction to the end of maturity of two lev-denominated issuances of the European Investment Bank (EIB), which local lenders have used to secure budgetary money.

ING Pension Insurance reckon the latest T-note auctions have attracted more pension funds. The company’s executive director Atanas Petrov said T-notes have gained appeal thanks to decrease in Bulgaria’s credit default swap (CDS).

Pension funds park a substantial portion of their assets in government securities but no statistics is available on how much they keep with Bulgarian and foreign notes.

Figures by the Financial Supervision Commission (FSC) as at end-June showed that universal pension funds keep one-third of their assets in foreign government securities, which have also drawn 24% of the assets of voluntary funds, taking the total to BGN 750 million.

(Dnevnik)

Almost two-thirds of Bulgarian employers plan to keep salaries on ice in the next 12 months, according to a new poll of ING Pension Insurance.

The survey conducted by pollster Alpha Research in October on executives in firms with more than 100 headcount revealed that only six percent plan to take the axe on wages and another 16% plan an increase.

Two thirds of the respondents said they plan no compulsory redundancies and 13 percent hope to welcome new people on board.

The construction and transport sectors are facing the gloomiest outlook, with job cuts looming over one-third of builders, one-fourth of carriers and one-fourth of companies in the services sector, where new jobs are on the horizon, too.

The most popular measures to counter the downturn include slashing costs for raw materials and other materials, salaries, perks as well as marketing and advertising.

According to the poll, a total of 75 percent of company executives expect to maintain or bolster their business activity by October 2009. The service companies the most bullish of all, with one in three respondents saying business is set to pick up over the 12 months ahead.

(Dnevnik)

Bulgaria’s budget 2010 faces four tough challenges including slimmer revenue, funding difficulties, potential support for the banking sector and aging population that should pile pressure on the pension system, the finance ministry said Thursday.

Shrinking exports coupled with softening domestic demand are expected to drag down revenue, mostly in the form of thinner proceeds from indirect taxation such as value-added tax (VAT) and excises. They will be pressed by flagging economic activity and spiraling inflation. Despite this concern, the finance ministry pumped expected VAT revenue for 2010 by BGN 200 million, hoping for a further BGN 100 million from social and healthcare contributions.

Another risk for next year’s budget is investors’ cratering confidence in markets in Central and Eastern Europe, which is spelling trouble in financing the budget. The problem is aggravated by Bulgaria’s nagging budgetary deficits that snapped open in the last months in office of the former Cabinet. The current account shortfall is shrinking but still calls for prudent fiscal policy.

The finance ministry sees another potential risk in a possible need for a capital injection into the banking system, even though this is not a very likely scenario.

The fourth long-term risk for public finance sustainability is the nation’s aging population, which calls for an overhaul in the pension system. To tackle this issue, the International Monetary Fund (IMF) and the World Bank have proposed an increase in pension age, an option that has met stiff opposition and is yet could end up on the table next year.

(Dnevnik)