Download - FEAS
Download - FEAS
Download - FEAS
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006<br />
BUCHAREST STOCK EXCHANGE<br />
In 2005, the 10th year of trading activity for<br />
Bucharest Stock Exchange, all the market<br />
indicators reached historical highs.<br />
Stere Farmache<br />
General Manager & CEO<br />
In 2005, the 10th year of trading activity for<br />
Bucharest Stock Exchange (BSE), all the<br />
market indicators reached historical highs.<br />
We could say that after the first decade of<br />
trading ended BSE passed to a new stage<br />
from its modern history to the new<br />
approaching challenges.<br />
The total market capitalization of the BSE at<br />
the end of 2005 exceeded more than EUR<br />
15 billion compared to almost EUR 9 billion<br />
at the end of 2004. The market capitalization<br />
currently represents 26% of Romania’s GDP.<br />
This increase of 70% in terms of market<br />
capitalization represented one of the highest<br />
indicators from this region. The total turnover<br />
in 2005 exceeded more than EUR 2.1 billion<br />
almost four times more than it was in 2004.<br />
Also, the daily turnover value was almost<br />
EUR 9 million. On the December 6, the<br />
number of trades per day exceeded for the<br />
first time 10,000.<br />
Furthermore, all three indices computed by<br />
the BSE posted significant increases<br />
reaching all time highs in 2005. Thus, the<br />
BET index stood at 59% above the value on<br />
the last trading day of 2004. The BET-C<br />
index posted an annual growth rate of 46%,<br />
while BET-FI recorded an annual growth rate<br />
of 191%. In March 2005, the BSE and Wiener<br />
Borse AG (WBAG) launched the ROTX Index<br />
as a result of cooperation between the two<br />
institutions. The ROTX is a capitalizationweighted<br />
price index which is calculated on<br />
the prices of the most actively traded stocks<br />
of the BSE, making it suitable as a<br />
benchmark and underlying for standardized<br />
derivatives (such as futures and options) or<br />
structured products (such as warrants, index<br />
certificates and swaps).<br />
In terms of new instruments, in 2005 the<br />
investors had for the first time the opportunity<br />
to trade preemptive rights. Another<br />
noteworthy evolution is that of the turnover<br />
for the municipalities which increased two<br />
times in comparison to 2004.<br />
For 2006 we expect to see the same<br />
increasing trend like the previous years in<br />
spite of new admission to trading,<br />
companies which were traded until the end<br />
of 2005 on the RASDAQ market. The number<br />
of traded companies could reach 100.<br />
Furthermore we expect in 2006 that a<br />
number of large state-owned companies to<br />
be transferred to private investors and stocks<br />
issues by the new “Ownership Fund” to be<br />
traded on the market. Hopefully all of these<br />
expectations will be achieved and that will<br />
generate an increase in the market<br />
capitalization to around EUR 20-25 billion.<br />
HISTORY AND DEVELOPMENT<br />
Trading in equities in Romania dates back to<br />
1882, a year after the legal framework was<br />
passed. The market was very slim and from<br />
the beginning official trading was soon<br />
substituted by off-exchange trading.<br />
However, with the exception of the two world<br />
wars and the economic depression, the<br />
market grew to significant levels reaching, in<br />
terms of listed securities, 56 shares (banks,<br />
oil, mining, industrial, and insurance and<br />
transportation companies) and 77 fixed<br />
income securities, in 1935.<br />
The peak was reached in 1938 but after the<br />
end of the Second World War, in 1948, the<br />
stock market was left without any public<br />
companies due to the nationalization of the<br />
entire economy. For almost fifty years<br />
Romania did not have one of the most vital<br />
institutions of a modern economy.<br />
The adoption in 1994, by the Parliament of<br />
Romania, of the Securities and Exchanges<br />
Act made the reconstruction of a modern<br />
capital market possible. The National<br />
Securities Commission, the BSE, brokerage<br />
companies, and the National Association of<br />
the Securities Dealers have been set up<br />
based upon the provisions of this Act, the<br />
main institutions of the Romanian capital<br />
market.<br />
The BSE was re-established in April 1995, by<br />
a decree of the National Securities<br />
Commission (NSC) at the request of 24<br />
brokerage houses–the founding members–to<br />
trade on the BSE. A new<br />
law on securities was approved by the<br />
Parliament in 2002.<br />
For 10 years the BSE was a self-financing<br />
and self-regulating institution of public<br />
interest, operating on corporate principles. At<br />
the beginning of 2005 BSE transformed<br />
according to the provisions of the new law<br />
which governs the capital market legal<br />
framework from July 2004 into a joint stock<br />
company with 67 shareholders representing<br />
only investment firms.<br />
Trading is performed on the BSE in a<br />
dematerialized environment. Exchange<br />
operations have been conducted exclusively<br />
through the electronic systems since the reestablishment<br />
of the Exchange.<br />
FUTURE OUTLOOK<br />
2005 was very special for BSE because the<br />
company passed through significant changes<br />
and important projects. Thus, at the<br />
beginning of the year BSE became a joint<br />
stock company after being a public entity for<br />
10 years. Also, in the first quarter of the year<br />
BSE implemented a new integrated platform<br />
named ARENA for trading, clearing,<br />
settlement and registry which was developed<br />
in-house. At the middle of the year, the BSE<br />
trading platform accommodated the<br />
denomination process of the domestic<br />
currency. By the end of the year the BSE<br />
celebrated its 10th anniversary of trading and<br />
concluded the merge process with RASDAQ.<br />
Like the previous years BSE continued to be<br />
one of the best performers in the region.<br />
According to our estimations, the upward<br />
trend will maintain for the next year which will<br />
represent the year before the Romania’s<br />
integration in the EU and the market<br />
capitalization of the BSE will exceed 30% of<br />
the GDP in 2006.<br />
The BSE plans for 2006 are to:<br />
• reorganize the structure of the stock<br />
exchange market according to the legal<br />
framework;<br />
• admit to trading new companies owned by<br />
the state;<br />
• develop a trading platform for financial<br />
derivatives instruments;<br />
• introduce new instruments and trading<br />
techniques provided for by the new<br />
legislation, such as financial derivatives,<br />
margin trading and short sale; and<br />
• launch indexes for economic sectors that<br />
are represented on the stock market.<br />
PAGE 60