The Romanian capital market has in the past 12 months undergone some of the most sweeping overhauls with the aim of entering the shortlist for upgrading to the league of emerging markets.
Capital market legislation has been changed, the status of RASDAQ market has been clarified, foreign investors’ fiscal registration process has been streamlined and yet private companies are not rushing in, at least not yet, to raise funding on the bourse.
It is only software solution provider Arobs Transilvania, controlled by entrepreneur Voicu Oprean, that has officially announced its plan to get listed on the bourse. Unofficially, another private floatation is likely to come from bottled water wholesaler La Fantana.
“It is our sincere wish to see a private sector IPO in the near future to prove that the BVB is a viable centre to raise long-term capital for the corporate sector in Romania,” James Hyslop, EBRD manager for Romania, told ZF in an interview.
EBRD entered BVB’s shareholding structure in November 2014 by buying a 4.99% stake, now valued at RON14.7 million. The move was welcomed on the market, with investors expecting the bank’s involvement to professionalize the local capital market.
“Romanian businesses are yet to tap into local capital markets. A part of the reason is that the BVB tariffs are too high to favour local issuances as opposed to listings in Luxembourg, which is preferred by a number of Romanian companies. The IPO process could benefit from some improvements as well. Foreign investors are sometimes struggling with red tape to get access to the market. All of these are being addressed as priorities and this is reflected in the latest draft of the capital market law,” said Hyslop.
The local capital market is caught in a vicious circle: companies are reluctant to raise funds on because there’s limited investor appetite, and investors’ interest is limited because there’s limited activity on the exchange, adds the EBRD director.
Asked how EBRD see BVB in three years in terms of capitalization, Hyslop said: “We would like to see the bourse upgraded to MSCI Emerging Market Classification. The upgrade to the Emerging Market status is a means of establishing eligibility for a greater pool of investor capital from institutional investors that currently do not invest in any frontier market and will also contribute to a greater visibility of Romania as an investment destination worldwide”.
Another capital market segment EBRD has been active on in recent years is the primary bond market. “We will look to support well-structured bond issuance programs that we believe further capital market development and satisfy investor demand,” said Hyslop.
The biggest leu bond issue to be listed on the Bucharest bourse is the one set to be operated by the Bucharest Municipality in the coming months. The Municipality will issue leu bonds worth above RON2.2 billion to reimburse a bond falling due in June.
“We do welcome the Bucharest Municipality’s plans to issue local currency bonds. It will help raise critically needed finance by engaging domestic private capital and at the same time will contribute to strengthening local capital markets,” stated EBRD official.
As a minority stakeholder in BVB, the bank has a representative, James William Turnbull, in the managing board of the Central Depository. “We need to align the processes at the Central Depository to the overall goals of the Bucharest Stock Exchange and the overall STEAM initiative – generally this means improvement to operational efficiency in the clearing settlement and depository functions,” said EBRD official.
The bank will also get involved in a comprehensive review of the depository operations. “We would then support the implementation of a monitoring mechanism to achieve these goals,” concluded Hyslop.
(English version by Catalina Apostoiu)