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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2005
BUCHAREST STOCK EXCHANGE
Stere Farmache
General Manager & CEO
Following the positive economic climate
Central Eastern European (CEE) emerging
markets registered in the last years, 2004
was the fifth year in a row when Romania’s
GDP continued to grow (8.1% year-on-year
basis) and inflation continued to decrease.
The inflation rate dropped below 10% for the
first time since 1989 to 9.3%. Further, the fall
in saving interest rates and the decrease in
the yield rate for Government bonds issued
in 2004, as well as the volatility of foreign
currencies contributed to an increase in the
number of investors and capital driven
toward the Bucharest Stock Exchange (BSE).
The total market capitalization of the BSE in
2004 increased three times to reach almost
US$ 12 billion compared to US$ 3.7 billion at
the end of 2003. The market capitalization
currently represents 17% of Romania’s GDP.
Furthermore, all three indices computed by
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, 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. Based upon the
provisions of this Act, the main institutions of
the Romanian capital market: the National
Securities Commission, the BSE, brokerage
companies, and the National Association of
the Securities Dealers have been set up.
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The total market capitalization of the BSE in
2004 increased three times to reach almost
US$ 12 billion. The market capitalization
currently represents 17% of Romania’s GDP.
the BSE posted significant increases;
reaching all time highs in 2004. On the last
trading day of 2004 all indices recorded
values two times higher than those of the last
trading day of 2003. Thus, the BET index
stood at 101% above the value on the last
trading day of 2003. The BET-C index posted
an annual growth rate of 104%, while BET-FI
recorded an annual growth rate of 115%. The
daily average turnover also increased from
US$ 1.3 million in 2003 to over US$ 3.3
million in 2004 and the turnover for 2004 of
US$ 746.8 million increased by more than
161% as compared to 2003 (US$ 285.7
million).
2004 also brought 3 new issuers to the BSE,
representing banking, energy and textiles
businesses. In addition, several listed
companies raised capital through the BSE
totaling US$ 16.3 million. It was the first time
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.
The BSE is a self-financing and selfregulating
institution of public interest,
operating on corporate principles. 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.
that one company initiated an IPO in the
amount of US$ 3 million. With the support of
the Romanian Government, a multi-annual
program “A Strong Market” was launched to
develop the capital market and to
consolidate the financial market for a
successful integration of Romania to the
European Union (EU) in 2007. Thus, seven
large state-owned companies are planned to
be listed on the BSE during the coming two
years, and are expected to contribute to a
higher liquidity and to increase in the market
capitalization by 20%.
In December 2004, the BSE and Wiener
Borse AG (WBAG) signed a Memorandum of
Understanding, which establishes the basis
of a co-operation between the two
institutions.
FUTURE OUTLOOK
In 2004, Romania's Stock Exchange has
been one of the best performers in the
region. According to our estimations, the
upward trend will continue accelerate during
the next years before the Romania’s
integration in the EU and the market
capitalization of the BSE will exceed 20% of
the GDP in 2005.
The BSE plans for 2005 are to:
• allow new types of intermediaries to enter
the market (according to the provisions of
the new Romanian Capital Market Act), such
as commercial banks and other credit
institutions, including investment firms from
member and non-member EU countries;
• transform the BSE into a joint stock
company;
• introduce new instruments provided for by
the new legislation, such as financial
derivatives;
• launch indexes for economic sectors that
are represented on the stock market; and
• finalize preparation for the implementation
of a new trading system for shares: ARENA.
ARENA is a trading system developed inhouse,
which is now used only for
supporting the bond market.