ANNUAL REPORT JUNE 2010
FEDERATION OF EURO-ASIAN STOCK EXCHANGES
BUCHAREST STOCK EXCHANGE
CEE economies were eventually hit by the
international crisis, its effects prevailing
during the second half of 2008.
Anca Dumitru
CEO
CEE economies were eventually hit by the
international crisis, its effects prevailing during
the second half of 2008. Despite the fact that
the “subprime crisis” was tearing down the
financial markets in the USA since 2007,
Western Europe showed the first major signs
in mid 2008. It fiercely hit the local market
during the autumn months of 2008.
HISTORY AND DEVELOPMENT
There are more than 125 years since the first
trading floor opened its doors in the centre of
Bucharest, very close to the National Bank, on
the 1st of December 1882. This event followed
the first “Law on bourses, mercantile traders
and intermediaries” enacted in 1881, following
the French model. This bill was the legal
framework for the functioning of the stock and
mercantile exchanges in Romania.
It developed into a very dynamic exchange due
to the companies listed, mainly from sectors
like banking, mining, oil, insurance and
transport. During the wars, as the entire
Romanian economy flourished, the Stock
Exchange also recorded its booming period. In
1935 there were 56 shares listed and 77 fixed
income securities. After a peak in 1938, the
Stock Exchange was closed in 1948, when the
new communist regime nationalized all
companies.
A new beginning for the Romanian capital
market was in 1994 when Romanian Parliament
passed the first capital market law, setting up
the legal framework for creation of all new
capital market institutions.
The Bucharest Stock Exchange was re-
established in April 1995, and the first trading
day took place on 20 November, same year.
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With the globalization of the international
financial markets and a substantial
dependence on international funds, the local
stock market began to feel a sharp decline in
cash. Hence, the stock prices plunged with
percentages hard to imagine a year ago and
moreover seemed irrational considering the
promising financial results and
macroeconomic performance. This showed the higher connection of the local
stock market with the international cash flows
and as a result determined extremely low
liquidities.
From the beginning, the entire trading process
took place from in a dematerialised
environment. The most recent regulations are
harmonized with the latest EU legislation
regarding the capital market. Liquidity was the main concern of both market
participant but also of the BVB management.
The average daily turnover contracted to Euro
5.4 mil from Euro9.3 million in 2008. Therefore,
the main objective of the BVB management will
be to improve the market liquidity. All efforts
are made to attract new companies for listing
and to launch new products. In this respect,
BVB is having discussions with key players in
the ETF markets that are interested in
launching these products locally.
Institutional changes took place also during its
15 years of operation. Set up in the beginning
as a public interest institution, Bucharest Stock
Exchange went through a demutualisation
process in 2005. The BVB externalised the
registry/ clearing functions and the new Central
Securities Depository was set up at the
beginning of 2007, having the Exchange its
main shareholder. Along with the Institute of
Corporate Governance, the Central Depository
and the newly set up CCP (Central Clearing
Counterparty) for the derivatives market and
The Compensation Fund, BVB is currently part
of the BVB Financial Group.
FUTURE OUTLOOK
2009 proved to be eventually a better year than
expected, as the local stock market performed
beyond expectations. Although, it was a volatile
market, all BVB indices performed positively
during 2009, with even higher performances of
the sector indices than the blue-chip index BET.
BET recorded a 60% recovery at the end of the
year, while the financial services sector index
BET-FI rose almost 90% compared to the
previous year-end.
We can say that in 2008 the general financial
context at the international level negatively
shaped the evolution of the main stock market
indicators: the level of indices, market
capitalization and turnover, all of which
plummeted towards the end of year.
With assets worth more than Euro 3 billion, the
listing of the Property Fund has been the most
awaited event for the last couple of years. The
selected fund manager, American company
Franklin Templeton, is looking to finalize the
Fund listing by the end of 2010.
As the political effervescence was left behind
after the elections end, the IMF stand-by
agreement is well on track and real signs of
economic recovery already exist, BVB believes
that 2010 will bring considerable enhancement
in the turnover and liquidity at BVB.
What it is to be considered a cornerstone in
BVB Exchange’s modern history is the decision
to list BVB shares on its trading platform. This
major event is expected to take place in the
first half of 2010.