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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006 BUCHAREST STOCK EXCHANGE In 2005, the 10th year of trading activity for Bucharest Stock Exchange, all the market indicators reached historical highs. Stere Farmache General Manager & CEO In 2005, the 10th year of trading activity for Bucharest Stock Exchange (BSE), all the market indicators reached historical highs. We could say that after the first decade of trading ended BSE passed to a new stage from its modern history to the new approaching challenges. The total market capitalization of the BSE at the end of 2005 exceeded more than EUR 15 billion compared to almost EUR 9 billion at the end of 2004. The market capitalization currently represents 26% of Romania’s GDP. This increase of 70% in terms of market capitalization represented one of the highest indicators from this region. The total turnover in 2005 exceeded more than EUR 2.1 billion almost four times more than it was in 2004. Also, the daily turnover value was almost EUR 9 million. On the December 6, the number of trades per day exceeded for the first time 10,000. Furthermore, all three indices computed by the BSE posted significant increases reaching all time highs in 2005. Thus, the BET index stood at 59% above the value on the last trading day of 2004. The BET-C index posted an annual growth rate of 46%, while BET-FI recorded an annual growth rate of 191%. In March 2005, the BSE and Wiener Borse AG (WBAG) launched the ROTX Index as a result of cooperation between the two institutions. The ROTX is a capitalizationweighted price index which is calculated on the prices of the most actively traded stocks of the BSE, making it suitable as a benchmark and underlying for standardized derivatives (such as futures and options) or structured products (such as warrants, index certificates and swaps). In terms of new instruments, in 2005 the investors had for the first time the opportunity to trade preemptive rights. Another noteworthy evolution is that of the turnover for the municipalities which increased two times in comparison to 2004. For 2006 we expect to see the same increasing trend like the previous years in spite of new admission to trading, companies which were traded until the end of 2005 on the RASDAQ market. The number of traded companies could reach 100. Furthermore we expect in 2006 that a number of large state-owned companies to be transferred to private investors and stocks issues by the new “Ownership Fund” to be traded on the market. Hopefully all of these expectations will be achieved and that will generate an increase in the market capitalization to around EUR 20-25 billion. HISTORY AND DEVELOPMENT Trading in equities in Romania dates back to 1882, a year after the legal framework was passed. The market was very slim 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. For almost fifty years Romania did not have one of the most vital institutions of a modern economy. The adoption in 1994, by the Parliament of Romania, of the Securities and Exchanges Act made the reconstruction of a modern capital market possible. The National Securities Commission, the BSE, brokerage companies, and the National Association of the Securities Dealers have been set up based upon the provisions of this Act, the main institutions of the Romanian capital market. The BSE was re-established in April 1995, by a decree of the National Securities Commission (NSC) at the request of 24 brokerage houses–the founding members–to trade on the BSE. A new law on securities was approved by the Parliament in 2002. For 10 years the BSE was a self-financing and self-regulating institution of public interest, operating on corporate principles. At the beginning of 2005 BSE transformed according to the provisions of the new law which governs the capital market legal framework from July 2004 into a joint stock company with 67 shareholders representing only investment firms. Trading is performed on the BSE in a dematerialized environment. Exchange operations have been conducted exclusively through the electronic systems since the reestablishment of the Exchange. FUTURE OUTLOOK 2005 was very special for BSE because the company passed through significant changes and important projects. Thus, at the beginning of the year BSE became a joint stock company after being a public entity for 10 years. Also, in the first quarter of the year BSE implemented a new integrated platform named ARENA for trading, clearing, settlement and registry which was developed in-house. At the middle of the year, the BSE trading platform accommodated the denomination process of the domestic currency. By the end of the year the BSE celebrated its 10th anniversary of trading and concluded the merge process with RASDAQ. Like the previous years BSE continued to be one of the best performers in the region. According to our estimations, the upward trend will maintain for the next year which will represent the year before the Romania’s integration in the EU and the market capitalization of the BSE will exceed 30% of the GDP in 2006. The BSE plans for 2006 are to: • reorganize the structure of the stock exchange market according to the legal framework; • admit to trading new companies owned by the state; • develop a trading platform for financial derivatives instruments; • introduce new instruments and trading techniques provided for by the new legislation, such as financial derivatives, margin trading and short sale; and • launch indexes for economic sectors that are represented on the stock market. PAGE 60
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006 BUCHAREST STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ millions # Shares millions Total Volume Average Daily Volume Total Volume Average Daily Volume Stocks Jan-06 420.7 20.0 1,748.9 83.3 Feb-06 335.6 16.8 1,551.6 77.6 Mar-06 293.7 12.8 1,734.3 75.4 Apr-06 114.7 5.7 498.6 24.9 May-06 219.5 10.0 1,028.5 46.7 Jun-06 173.8 7.9 794.7 36.1 TOTAL 1,558.0 12.2 7,356.6 57.3 Bonds Jan-06 2.8 0.13 0.02 0.0008 Feb-06 1.2 0.06 0.02 0.0009 Mar-06 1.4 0.06 0.03 0.001 Apr-06 0.56 0.03 0.03 0.002 May-06 0.94 0.04 0.006 0.0003 Jun-06 1.9 0.08 0.007 0.0003 TOTAL 8.8 0.07 0.11 0.0008 Other Jan-06 0.0 0.0 0.0 0.0 Feb-06 0.0 0.0 0.0 0.0 Mar-06 0.03 0.006 391.7 78.3 Apr-06 0.0 0.0 0.0 0.0 May-06 0.0 0.0 0.0 0.0 Jun-06 0.0 0.0 0.0 0.0 TOTAL 0.03 0.006 391.7 78.3 Market Capitalization (US$ millions) Index MONTHLY STOCK VOLUME VS INDEX (US$ millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ millions) Jan-06 23,278.6 2,041.7 Feb-06 24,048.7 2,107.7 Mar-06 22,115.3 1,942.7 Apr-06 23,648.0 2,055.4 May-06 21,491.9 1,932.9 Jun-06 19,683.0 1,893.8 CONTACT INFORMATION 450 400 350 300 250 200 150 100 50 0 2,500 25,000 2,000 20,000 1,500 15,000 1,000 10,000 500 5,000 0 0 Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun Contact Name Ms. Adriana Tanasoiu E-mail adriana.tanasoiu@bvb.ro Website www.bvb.ro PAGE 61
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