ExpatExpat Capital is the largest independent asset management company in Bulgaria, offering personalized long-term financial planning strategies. The company is a member of the American Chamber of Commerce in Bulgaria.

Nikoly Vasilev, Managing partner and Executive director of Expat, recently published a report about the current political and economic state of the country.

Report key points:

  • As a NATO member since 2004 and an EU member since 2007, Bulgaria is enjoying political and economic stability
  • Debt/GDP at 22% and falling, 3rd lowest in the EU
  • GDP growth is 3-4%, salaries are rising by 41% over 4 years (in EUR terms)
  • Budget surpluses since 2016, current account surpluses since 2013
  • Record-low unemployment at 4.2% as of July 2019
  • Investment grade rating of the sovereign debt
  • Accelerating real estate prices
  • A stable banking sector, strong credit growth with falling NPLs (non-performing loans)
  • Joining of the ERM-II mechanism expected by 2020, joining of the Eurozone by 2023
  • Government 9-yr EUR-denominated Eurobonds trading at a 0.27% yield – extremely low

… but a cheap and sleepy equity market

  • SOFIX, the main Bulgarian equity index, has fallen by -21.8% for the last 2 years (since 16 August 2017). The S&P 500 has risen by +25.6% in EUR terms, and the neighbouring Northern Macedonian market by +60% for the same period. The neighbouring Greek market has been up by +50.5% since December 2018.
  • The average (aggregated) P/E for the 15 stocks in SOFIX is 9.6x (12-mo trailing), while P/B is 0.66x – among the lowest valuations for the CEE region

We believe this is about to change. A Macro Play. We see +25% upside in 6-12 months

  • With the start of the new autumn business season, we expect the stock market to wake up again and rise by +25% in 2020. Our target level for the index is 715, from the current level of 571.80 (as of 3 September 2019)
  • One of the triggers should be Bulgaria’s expected ERM-II membership within a few months, followed by a potential Eurozone membership in a few years
  • An ERM-II membership, combined with continuing prudent fiscal policies, should lead to a 2- notch improvement in the credit ratings. For the first time, they might start with the letter ‘A’ soon

Buying the Bulgarian index ETF is the easiest way to play the market

  • Expat Capital created the Bulgarian index ETF in 2016, Expat Bulgaria SOFIX UCITS ETF
  • It has been listed on the Bulgarian Stock Exchange (in EUR and BGN), on the Frankfurt Stock
  • Exchange (in EUR), and on the London Stock Exchange (in EUR)
  • Ticker: BGX
  • Investments or divestments in/from the ETF of EUR 10 mln a day are achievable