2013 in Review – Bucharest Stock Exchange

The privatization of state-owned companies on the Bucharest Stock Exchange (BSE) has taken off this year, feeding more liquidity into the market and putting Romania on the map of international investors. This year has also seen the appointment of Ludwik Sobolewski at the helm of the BSE and a EUR 1.2 million fraud case at Harinvest, a Romanian brokerage.

The government raised this April EUR 72 million from selling a 15 percent stake in Transgaz, the state-owned gas transport company, through a secondary public offering (SPO).  The listing was part of a wider privatization program agreed with the IMF

The privatization program continued this September with the successful listing of a 10 percent stake in Nuclearelectrica, the state-owned nuclear power producer, through an initial public offering (IPO).

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The local stock exchange market reached a historic milestone this November following the IPO in Romgaz, the state-controlled gas producer. The government raised EUR 391 million from selling a 15 percent stake through a dual listing in Bucharest and London.

The shares in state-owned companies were oversubsubcribed in the tranche of local retail investors, signaling potential demand for future listings in state-owned hydroelectricity producer Hidroelectrica and state-controlled Electrica, the power supplier and distributor, scheduled for the first half of 2014. A minority stake in Oltenia Energy Holding (CEO), another state-owned entity, should also be sold next year on the BSE.

Polish Ludwik Sobolewski (in picture) took the helm at the BSE this autumn, outlining an ambitious plan to make the local stock exchange a contender to Budapest and Prague in the next two years. He previously headed the Warsaw Stock Exchange.

“We will work on improving the access to the market (e.n. next year). This is important when it comes to privatizations,” Sobolewski told BR this week.

“We are a frontier market and we will remain as such for some time,” commented the CEO on Romania’s potential to become an emerging market.

The IPO in constructions materials maker AdePlast failed this October, casting doubt on Romania’s ability to attract domestic private companies on the local stock exchange. The company aimed to raise between EUR 13 -15 million from floating a 33 percent stake on the BSE. 

Raiffeisen Bank raised EUR 50.5 million from issuing corporate bonds with a 3-year maturity this summer.

UniCredit Tiriac Bank raised EUR 123 million this summer from issuing corporate bonds with a 5-year maturity this summer.

The Financial Supervision Authority (FSA) started operations this year, regulating the insurance industry, the stock exchange and the private pensions system.

A massive fraud scandal was unveiled later this year, with clients of Harinvest brokerage claiming they were missing over EUR 1 million in funds. The ASF is currently overseeing the investigation. Sobolewski commented the first signs of funds mismanagement were registered in October 2012. He is calling for a tighter regulation and higher capital requirements for brokers.

The daily turnover on the BSE rose from EUR 6.7 million in 2012 to EUR 10.5 million by mid-December 2013, according to BSE data.

BSE wants more market makers in 2014

During his tenure, Sobolewski outlined plants to increase the profitability of the BSE and improve the overall visibility of the local stock exchange at international levels. Some of the first measures that will be rolled out next year include the increase of the trading period from 16:45 to 18:00 and the attraction of new market makers, especially for Nuclearelectrica and Romgaz.

The BSE has unveiled the implementation of a trading at last system, which is a new possible stage between closing and closed stage. The new system is pending approval of the FSA. Sobolewski has also proposed the splitting of the trading and post trading system, in a bid to obtain a real segregation between trading and custody accounts.

In addition, the BSE has recently drawn up a task force, comprising market players and opinion leaders, designed to indentify the main issues denting the development of the local capital market. According to Sobolewski, eight matters including points related to taxation and IPO standards will be submitted to PM Ponta next year.

Ovidiu Posirca