Romanian Capital Market
Romania is an Eastern European Emerging Market that has attracted the interest of a wide range of investors, both strategic and financial, in recent years.
Capital market operations in the country are managed and supervised by the National Securities Commission (NSC, http://www.cnvmr.ro), autonomous administrative body subordinated to the Romanian Parliament. The NSC issues the legal framework for capital market activities (trading, public offerings, asset management, brokerage); licenses capital market operations (new stock and bond issues, issuer corporate actions); supervises capital market participants. The capital market in Romania is regulated by Law No. 297/2004 and by other NSC regulations (the law is available on the NSC webpage).
There are two market opertors in Romania: the Bucharest Stock Exchange (BSE) and Sibex. BSE (http://www.bvb.ro) operates two markets: a regulated market and an alternative trading system called Rasdaq. BSE's regulated market lists some of the most important companies in Romania, including Petrom - the national oil operator owned by OMV, Banca Romana pentru Dezvoltare - Romania's second largest bank owned by Societe Generale, Banca Transilvania - one of Romania's most dynamic independent banks, the five Financial Investment Companies (SIF) - the largest investment funds in the country. The stock exchange also trades lists municipal, corporate and government bonds, as well as single stock and currency futures.
Rasdaq was set up primarily for trading of stocks distributed through Romania's Mass Privatization Program. Today there are over 1,500 issuers traded on the market. Rasdaq was merged into the Bucharest Stock Exchange in 2005. Sibex (http://www.sibex.ro) has an active futures and options market, as well as a new equity spot market.
All securities trading in Romania is carried out by brokerage companies called Financial Investment Services Companies (FISC) licensed by the NSC and established according to law 297/2004.
After the implementation of a modern capital market framework in Romania, the market underwent several distinct phases in its evolution. The implementation of the necessary institutional and regulatory framework in 1994-1996 was followed by a phase of accelerated growth in trading volumes and stock prices, in the first half of 1997, which was fueled by foreign investors.
The lack of a critical mass of local investors as well as slow improvements in economic and financial conditions in the country led to a prolonged bear market between late 1997 and 2000. This downward trend had left prices of Romanian stocks at very low valuations, with average P/E's of 1-2; furthermore, economic and financial conditions reached a turning point in Romania starting with 2000 and the economy started seeing visible and steady improvement.
This context was perceived as an opportunity by growing numbers of local and foreign investors, both individual and institutional. The market reversed its downward trend and stock prices on the Romanian market started growing in 2000. Apart from low valuations, growth was also fueled by new listings and by high earnings growth from some of the existing issuers. In 2008 Romania joined the ranks of markets hit by the financial crisis, but 2009 saw a steady increase in prices.
As of December 2009 total market capitalization of BSE's regulated market was 19.1 Billion EUR (up from 11.6 billion in 2008); the market capitalization of Rasdaq was 2.9 Billion EUR (down from 3.1billion in 2008).
A number of interesting new listings are expected on the market in the next few years: national utilities and telecom companies; Romania's largest bank, Banca Comerciala Romana; the Proprietatea fund, one of the largest investment funds in the region; a number of medium and large sized privately-owned companies in a wide range of sectors and industries.
The buy side is also expected to grow as the Romanian public increases the level of financial education, the number of foreign institutional investors increases and Romanian institutional investors such as mutual funds, private pension funds and insurance companies expand.
Market activity will also benefit from economic, political and social transformations currently taking place in Romania, including the country's accession to the European Union, increasing standards of living and wages, improving economic, fiscal and regulatory conditions.
We strongly believe that the Romanian market will continue to grow in the years to come. Let us be your guide so you can benefit from this opportunity.
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