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36 I Southeast Europe bne December 2018
Bucharest Stock Exchange CEO Adrian Tanase stresses the importance of developing the secondary market to increase liquidity.
INTERVIEW:
Bucharest Stock Exchange on the cusp of a new era
remains the main problem of the local stock exchange.”
Long-expected IPOs of state-owned companies such as hydropower producer Hidroelectrica have still
not materialised, but the BVB has
seen a series of private sector IPOs starting with that of the country’s largest healthcare provider MedLife in December 2016. But new listings alone are not enough to ensure sufficient liquidity, stresses Tanase. Accordingly, while seeking new listings, the BVB is at the same time implementing various projects to improve liquidity such as developing the secondary market.
“But to be an emerging market you can’t rely only on size. You should have an active primary market, but you should have an efficient secondary market as well. One of our main priorities is to enlarge the range of products offered by the stock exchange,” Tanase says. “The other, which is more complicated in my view, is to enlarge the individual investor community in Romania.
“If we manage to carry out these projects, Romania will become a real alternative for any Romanian companies or regional companies to get financing to develop their businesses.”
Concerning the secondary market, currently stock lending and short selling operations are not working efficiently
in Romania, and there is not yet a derivatives market, meaning Romania doesn’t offer leveraged products for investors. Addressing these areas “for sure would unlock the liquidity which at this moment is a little bit restricted by the market infrastructure,” says Tanase.
Obstacles to short selling and stock lending operations have been resolved by the new fiscal code, and Tanase expects they will soon be available
on the market. To enable derivatives trading for local stocks, a Central Counter Party (CCP) needs to be established for the local market. “We have the full support of the authorities, both the National Bank of Romania and the financial supervisory authority,
but this should also be supported by
Clare Nuttall in Bucharest
Romania achieved a breakthrough in its quest to achieve emerging market status this September, with stock market indexer FTSE Russell finally upgrading its liquidity criteria from ‘not met’ to ‘restricted’, putting
the long-sought upgrade from frontier to emerging market status within
grasp. Bucharest Stock Exchange (BVB) CEO Adrian Tanase spoke with bne IntelliNews about how this was achieved and what the next steps are.
At the end of September, the BVB announced that the Romanian capital market is just one step away from becoming an emerging market, a status already secured by its peers in the Czech Republic and Hungary, while Poland recently became the first former communist country to be elevated to developed market status.
Bucharest has been aiming to exit the frontier market category for years. In FTSE Russell’s latest Annual Country Classification Review announced in Sep-
www.bne.eu
tember, Romania was kept on the watch list of countries for possible reclassifi- cation to secondary emerging market status. But in a critically important move, Romania’s liquidity criteria was upgraded to ‘restricted’, following an improvement in broad market liquidity. Previously, Romania’s capital market was not considered to have sufficient broad market liquidity to support size- able global investment. The task ahead of the BVB will be to maintain liquidity at least at its current level until the next review in September 2019.
FTSE Russell’s move followed the upgrade by MSCI of three notes of Romania’s accessibility criteria – market regulation, information flow and trading – in June.
For the first time Romania has a certain perspective to be upgraded to an emerging market next year, Tanase told bne IntelliNews, adding, however, that, “We should implement projects to increase liquidity because liquidity