European stock markets plunged on Thursday amid fears of a default of Greek debt, with banking shares seeing some of the steepest declines. The European currency underwent a significant depreciation against the dollar and the Swiss franc on international markets.
In Bucharest, the main stock exchange indexes opened down 3% against Wednesday, with banking and energy shares depreciating the most. The leu continued to depreciate against the euro, while the leu/Swiss franc exchange rate matched the all-time low of 3.5050 recorded on December 30.
“Investors are staying away from stock and commodities and taking refuge in cash, gold and bonds issued in the United States fearing that a prospective bankruptcy of Greece might have a similar impact to that of the collapse of Lehman Brothers investment bank,” says Radu Craciun, investment manager at Eureko Pensii.
“I don’t see any reason for an improvement in the risk appetite
over the next few days, with all investors waiting to see what
decision European leaders will take on the rescue of Greece. The
sooner the decision to restructure Greece’s debt is made, the
better, because it could be perceived positively and appease the
markets,” Craciun adds.
On the short term, there are two key moments as far as Greece’s
rescue is concerned: the vote by the Greek Parliament on the new
Government on Tuesday, June 21 and the payment by the International
Monetary Fund of the next tranche to Greece on June 29. Greece’s
debt is the biggest in the eurozone, and is estimated to reach 158%
of GDP this year.
“I am pessimistic about the trend of stock markets on the very
short term, within the next few days,” says Dan Popovici,
investment manager of OTP Asset Management. “In two or three weeks’
time, if some positive news emerges from Greece, involving a
prospective restructuring of debt or a consensus of European
leaders on rescuing the country, we can expect the stock exchanges
to go up again,” Popovici added.
Jan Pricop, general manager of asset manager KD Investments says
that debt restructuring will surely happen by the end of the year.
“The reaction of the markets to such an event is hard to guess and
a worsening of the situation in Greece could impede Romania’s
economic recovery, but is not the only risk factor for
Romania.”
BRD Asset Management’s general manager Dan Nicu believes “There is no risk of default for Greek banks operating in Romania. Exposure to Greek banks entails a high risk for which a high risk premium is paid,” Nicu said.
This risk premium was included in the interest rates paid for deposits by Greek banks in Romania, which all the local investment banks have taken advantage of over the last three years.
“We reduced exposure to deposits opened with Greek banks in Romania to 3-4% of our assets as result of the debt crisis escalation,” says Nicolae Albu, chief investment officer of Erste Asset Management. He does not believe there is a risk of cash shortage among Greek banks in Romania, considering NBR said their solvency was above 11%, they had a comfortable level of liquidity and had back-up plans.