Victor Cionga, as the new executive manager of the Bucharest Stock Exchange, is crucial for the evolution of the bourse over the next few years. He must implement concrete measures to resuscitate the stock exchange and transform it into a major player for the economy.
“The objectives of the CEO have to start from the problems facing the company and its weaknesses compared with stock exchanges in the region,” says Mihaela Bilciu, general manager of brokerage house Tradeville.
Low liquidity, the small number of active investors, reluctance of privately held companies and of the central authorities to resort to the stock exchange for financing are the problems for which the new head and rest of the authorities of the capital market have to find solutions.
The low liquidity is by far the biggest problem of the Bucharest Stock Exchange. With average daily transactions of around EUR7 million this year and with sessions where the trading volume barely exceeded EUR2 million, the Bucharest bourse is not very attractive for foreign investors and local entrepreneurs, and not very likely to persuade the government that it is a viable privatization option.
“One of the objectives of the new manager should be to enhance investor trust so that the stock exchange could reach liquidity comparable with that of regional leaders,” says Cristian Dutescu, a lawyer specializing in the capital market and partner of law firm Dutescu & Partners.
The leader in the Central and Eastern Europe is the Warsaw stock exchange, with daily transactions of over EUR170 million. It is difficult for the Bucharest market to reach the level of the Polish bourse, considering that the latter’s average daily volumes have amounted to EUR7-8 million in the past few years after peaks of EUR25 million per day in its best years.
“At present, what the capital market lacks most are issuers. In the last twenty years there have been many delistings, but very few new entries, this trend has to be reversed. And I think this is largely up to those at the helm of the state, not at the helm of the stock exchange,” says Radu Hanga, general manager of BT Asset Management.
A large part of the 70 companies currently traded on the stock exchange have resulted from the privatization process, the number of companies that got listed “willingly” is extremely low for a stock exchange with a 20-year history. Banca Transilvania (TLV.RO), Banca Comerciala Carpatica (BCC.RO), Teraplast (TRP.RO), Impact (IMP.RO), Alumil (ALU.RO) and Flamingo (FLA.RO)–now a bankrupt company–make up the short list of private-held companies that have resorted to the stock exchange for financing in the past twenty years.
The low number of companies interested in floatation is an extremely worrying signal for the Bucharest stock market considering that in the past twenty years 50 top-performing companies got delisted, among which are Dacia, Terapia, Sidex.
“The new executive should attract at least one initial public offering worth over EUR100 million in the next year, and four or five IPOs from the private sector worth several tens of millions each,” Dutescu adds.
Because private companies are difficult to attract to the capital market, in the past few years the stock exchange has placed its hopes with privatizations. However, the state is not very willing to give its major energy companies up, either, and it is making a habit of postponing sales offerings.
The Bucharest stock exchange has low visibility in the economy, with the capitalization of listed companies accounting for less than 1% of GDP. In addition, few Romanians understand the benefits of saving through stock exchange investments or by participating in public offerings where the state sells stakes in major companies such as Petrom (SNP.RO) or Transelectrica (TEL.RO). The new manager should get actively involved in campaigns to advertise and popularize stock exchange investments.
(English version by Daniela Stoican)