Following the promotion in the Emerging Europe review by FTSE Russell, Business Review sat down with Leonardo Badea, Deputy Governor of the National Bank of Romania, to see how BNR views Romania’s move from a “Frontier Market” to a “Secondary Emerging market”.
What does the new status of Secondary Emerging market means for the Romanian capital market and what will be the effects of this promotion?
The effective promotion of the Romanian capital market to the status of emerging secondary market by FTSE Russell financial evaluation agency is the result of the worthy efforts in recent years of the entire local community involved in its development.
The effects are both direct (the inclusion of local companies in a series of international indices pursued by a class of larger investors compared to those present on our market so far), but especially indirect, mainly reputational and with long-term structural implications.
What are the main benefits of becoming a Secondary Emerging market?
Especially in the current context where all economies are in fierce competition for funding, effective entry into a higher category of capital markets is equivalent with an additional anchor in supporting the process of financial integration and European convergence, as well as with improved access to foreign capital. Acquiring the status of an emerging secondary capital market increases the attractiveness for foreign investors of locally issued financial instruments, from which will benefit both the private segment of the economy and public sector bond issuers. At the same time, it could facilitate the funding of the public-private partnerships.
How can Romania take advantage of its new status?
The more the Romanian economy will be open to financing through the capital market, the more significant the benefits of the new status acquired by it will be and the more visible the positive transformations will be. The step that the Romanian capital market is taking now has the premises to facilitate the effort of economic recovery and modernization of the country, if more and more entrepreneurs and local administrations will have the courage and ingenuity to turn their development ideas into projects that are economically feasible, transparent, with strong governance and through which to provide an attractive partnership for capital market investors.
In my opinion, financing through the local capital market, which today has become an emerging secondary market, is one of the great opportunities for Romania’s development in the near and medium future, along with financing through European funds.