This year was supposed to bring the stock exchange listing of several major state-run companies, such as Romgaz and Hidroelectrica. This was meant to draw interest from foreign investment funds and continue the momentum created when investment fund Fondul Proprietatea (FP.RO) was listed and increase the visibility of the Romanian market in the region.
The Bucharest stock exchange had budgeted a 16% increase for its business at the beginning of the year, when it relied on the fact that the Government would keep its promises and go ahead with the listings program.
Brokers too were hoping for a better year. Some were counting on a few major transactions that they were already working on together with foreign partners.
The involvement of Wall Street heavyweights in the major listings (Goldman Sachs at Romgaz, alongside Erste, BCR and Raiffeisen, Citi at Hidroelectrica, alongside BRD and Intercapital Invest) was a guarantee that Romania would catch the eye of major foreign investors, who were expected to bring more business for everyone on the stock exchange.
But once again expectations proved too optimistic. The Government change in May and the closeness of parliamentary elections (in December) prompted politicians to put on hold stock exchange privatization plans and the selection of professional managers for state-controlled companies.
Citing the fact that they would not be able to get a good enough price on the stock exchange, the government put off in October the sale on the stock exchange of 15% in Transgaz, thus postponing the entire listing program until next year, after elections.
With no fresh “merchandise” on the stock exchange and with no prospects of an improvement in the coming period, investors have lost interest. Highlights are few, such as the sale of a 0.4% stake in OMV Petrom (OMV.RO), at the end of November, and the transfer of more than 3% in Fondul Proprietatea earlier this month.
Only major institutional investors make purchases from time to time. But even then they ask for significant discounts because the market is not liquid and if they then want to sell, they don’t have who to sell to – this is the case of Artio, which has been struggling for a year to liquidate its portfolio.
So foreign and local investors don’t have that many reasons to come to the Bucharest stock exchange and many brokers have ended up doing nothing most of the time, with daily transactions amounting to a few tens of thousands of lei.
In the first 11 months of the year 15 brokerages and banks conducted 80% of stock exchange transactions. The same 15 companies shared almost 80% of fees, estimated at around RON50 million.
While the lower-ranking brokerages are barely getting by, things are not easy for the top-ranking companies either. ING and UniCredit, the largest international brokers on the market, announced their exit. For the respective bosses of the two groups in Amsterdam and Milan it no longer makes sense to keep operations that bring them revenue of EUR1 million per year. Greek-held Bancpost in turn closed down its brokerage and integrated the operations into the bank in order to cut costs.
Their departure doesn’t make anyone happy because the almost 20% market share that ING and UniCredit had together will not necessarily be shared among the brokers left on the market, but will most likely go away altogether. So next year a smaller number of brokers might fight over a 20% smaller market if the state doesn’t go ahead with the listings it has postponed and if no private company gets listed.
When the market is going down, it almost doesn’t matter who is no.1. (EUR1=RON4.5059)
(English version by Daniela Stoican)