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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT APRIL 2007
BUCHAREST STOCK EXCHANGE
Stere Farmache
General Manager & CEO
Although during the 2006 the number of
BVB listed companies slightly diminished,
the year end saw a capitalization of
EUR 21.4 billion, with almost 40% higher
than the previous year.
2006 was a very special for Bucharest Stock
Exchange (BVB) featured by institutional and
market positive changes: admission as a full
FESE member and a substantial increase in
turnover and market capitalisation.
Although during the 2006 the number of BVB
listed companies slightly diminished, the
year end saw a capitalization of EUR 21.4
billion, almost 40% higher than the previous
year. This substantial growth in the market
cap was determined by the rising trend of
the stock prices. 2006 market capitalization
represented 25% in 2006 GDP.
Stirred by the high market volatility, the BVB
indices continued their rising trend in 2006.
The last trading day of 2006 brought
significant increases in the indices values,
compared to the end of 2005: 22.2% for
BET, 28.5% for BET-C, 32.4% for BET-FI and
23.9% for ROTX. The indices followed the
trend of the region and consolidated during
the second half of the year.
Another step in the development of the BVB,
was the listing of the first international bonds
issue. This was a World Bank issue, RON
denominated with total value of RON 525
million (approximately EUR 150 million).
The significant value of this offer and the
success of it proved that some of the fears
of the local authorities towards the listing of
government debt instruments are, somehow,
unfounded.
On the institutional side, the BVB adopted
the new “Code” as market operator,
containing all new BVB regulations, which
became effective in November 2006.
The new code brought significant changes
regarding the listing structure and also
imposed measures to improve the liquidity
and transparency of the market. The code
also contains the legal framework for
implementation of short selling and margin
purchases.
All these measures played a significant role
in the evaluation process that Federation of
European Securities Exchanges (FESE).
The result of it was full FESE membership
for the BVB.
HISTORY AND DEVELOPMENT
Trading in equities in Romania dates back to
1882, a year after the legal framework was
passed. The market was very thin and from
the beginning official trading was soon
substituted by off-exchange trading.
However, with the exception of the two world
wars and the economic depression, the
market grew to significant levels reaching, in
terms of listed securities, 56 shares (banks,
oil, mining, industrial, and insurance and
transportation companies) and 77 fixed
income securities, in 1935.
The peak was reached in 1938 but after the
end of the Second World War, in 1948, the
stock market was left without any public
companies due to the nationalization of the
entire economy. After almost 50 years, the
BVB could be re-opened again.
In 1994, the Romanian Parliament passed the
first capital market law, setting up the legal
framework for the creation of the new and
modern capital market. The National
Securities Commission, the BVB, brokerage
companies, and the National Association
of Brokerage Houses have been set up
based upon the provisions of this law.
The BVB was re-established in April 1995,
and the first trading day took place on 20
November. The most recent law, the Capital
Market Law 297/2004, harmonizes the local
legislation with EU Directives regarding the
capital market.
Institutional changes also took place during
the Stock Exchange’s 11 years of operation.
Set up in the beginning as a public interest
institution, in 2005 the BVB went through a
process of demutualization, and the 67
intermediaries, members of the BVB, became
the shareholders in the newly set-up joint
stock company.
From the beginning, trading has been
performed in a dematerialized environment.
Exchange operations have been conducted
exclusively through the electronic systems
since the re-establishment of the Exchange,
which included for more than ten years in the
registry, clearing and settlement operations.
FUTURE OUTLOOK
The BVB continued in 2006 its hard work
in changing the market structure and the
legislation to become a more accessible,
transparent and fair market-oriented.
The results were seen at the end of the year,
when the market capitalization represented
25% of the GDP with an increase of almost
40% compared to 2005.
We also expect the positive evolution to
continue in 2007, and hope that the liquidity
of the market to place between EUR 15-18
million of average daily turnover and market
capitalization to represent about 30% of GDP.
The BVB strategic development plan has now
passed to the implementation stage, through
the new BVB Code, which includes the legal
framework for introduction of derivatives,
short selling and margin purchases. Some of
the targets for 2007 are:
• introduction of the trading platform for
derivatives, by summer of this year,
• implementing trading operation on short
sale, margin purchases and securities
borrowing,
• listing new instruments like government
securities, warrants, ETFs, mortgage-backed
securities,
• listing of the major utility companies, some
of them still state-owned,
• listing of the “Property Fund”, a major fund
created to compensate the damages of the
nationalization process,
• promotion the structured products issued
on BET, and;
• playing a more active role in the region.
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