The Bucharest Stock Exchange (BVB) plummeted 7.41% on Monday, August 8, the steepest decline in 15 months, with some shares losing over 10% under pressure from severe corrections on European markets. The German Stock Exchange fell by over 4.4% on Monday, France’s lost over 4.6% and the London Stock Exchange fell 3.3%. The American market opened the first session of the week with an abrupt decline of 3%.
The Bucharest Stock Exchange hit a low since May 2010. OMV Petrom (SNP.RO), the largest company in Romania, lost 7.83% of its stock exchange value, while the shares of Banca Transilvania (TLV.RO), the largest Romanian-controlled bank, lost a major 12%.
The extent of corrections was amplified by the fact that the Bucharest Stock Exchange is a peripheral market, dominated by speculators and with low liquidity.
The Stock Exchange slump was caused by the downgrade by Standard & Poor’s agency of the United States’ triple-A rating on Friday night. In light of the new events, president Traian Basescu, through his spokesman, answered ZF’s questions on the risk of contagion with external markets for Romania.
“The measures adopted by the Government through Romania’s Economic Program – for whose implementation there is also international financial aid – have had a positive effect in terms of improving the perception on the evolution of the national economy. However, vulnerabilities could be generated externally by economic evolutions, especially in the euro zone, as well as by the suspension of cost adjustment measures at state level and of major structural reforms at national level, but especially as a result of the election cycle,” says Valeriu Turcan, the president’s spokesman.
On Monday morning, BNR governor Mugur Isarescu told a press conference that the IMF arrangement was sufficient to afford protection to Romania. Asked by a journalist what measures the central bank was preparing in order to protect Romania, the governor answered “don’t you understand that we have an insurance policy from the IMF? What new measures do you want? Two years ago you said ‘the loan was too big.’ How many policies do you want?”
However, after the experience of the Stock Exchanges crash in 2008, Romanian entrepreneurs cannot remain unconcerned.
George Copos, who owns several companies on the Romanian market, says that his prediction in 2009 that “Planet Earth was sinking,” when the effects of the crash of Lehman Brothers started to be felt on the Romanian market, now, with the downgrading of the US, he believes he has been proven right.
Businessman Valer Blidar, one of the leading Romanian industrialists, who controls railway car manufacturer Astra Vagoane Calatori says “Romania cannot expect anything good after all that’s happening now,” that European markets will be affected, after those in Libya, Egypt and Iran and that he has started to have “sleepless nights.”
(English version by Daniela Stoican; Editing by Radu Bostan)