WOOD Flash – Romania macro: update on RON and yield forecasts
The Romanian leu (RON) has been trading in line with our fair value model for the past year, and has become mildly stronger than our fair value estimate only recently, due most likely to the pick-up in portfolio inflows that followed the change of government last year. Our model signals a continuing mild depreciation bias to 4.9/EUR in 2021E and 5.0/EUR in 2022E, which we expect to materialise, notwithstanding encouraging reform efforts by the Citu government. In terms of local sovereign bond yields, our fair value model for the 10-year yield is materially above the current market trend, at 4.5-5.0%. We expect yields to converge towards our model estimate over the course of this year. A lower trajectory would need a stronger budget consolidation commitment. Ultimately, we do not see any fundamental persistent reason for the divergence between the market and fair value.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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