Bucharest Stock Exchange eyes increased investment following upgrade to emerging market status

The Bucharest Stock Exchange (BVB) expects more foreign capital inflow now that FTSE Russell, a global multi-asset index provider, has promoted Romania to the status of secondary emerging market and has included two Romanian shares – retail bank Banca Transilvania and nuclear power plant operator Nuclearelectrica – to the FTSE Global All Cap Index dedicated to emerging markets. Romania had previously held frontier market status.

“I hope that this new status will translate into increasing stock market capitalisation, so that our country becomes an important player in the financial markets of the region,” said the country’s president, Klaus Iohannis, at an event on September 21 to mark Romania’s promotion.

Finance Minister Florin Cîţu said that he hoped Romanian society would understand how important gaining emerging market status is.

“This really is a historic moment for the stock market,” he said. “It is the capital market equivalent of joining the European Union. Romanian companies listed on the exchange are now just a click away from billions of euros in investment. There are investors who watch the markets every day looking for markets in which to invest. Romania is now one of the options that they will have.”

“23 years ago, when we were listed on the BVB, we were a small bank with a capitalisation of 10 million US dollars. Today we are delighted to contribute from a leading position both in the banking sector and in terms of liquidity on the stock exchange to Romania’s inclusion in the FTSE Russell index,” added Horia Ciorcila, chairman of Banca Transilvania’s board.

CEO of majority state-owned Nuclearelectrica Cosmin Ghita said that the energy firm’s inclusion in the FTSE Russell index “reflects our efforts and motivation to have a robust company and at the same time to support the development of Bucharest Stock Exchange by attracting new investors”.

UK-based FTSE Russell, part of the London Stock Exchange Group, is one of the three global capital market index providers, alongside MSCI and Standard and Poor’s Dow Jones.

“This is a clear example of the fact that the Romanian economy can overcome obstacles in its path and can achieve very good results when legislation and regulations are favourable,” said the UK’s ambassador to Romania Andrew Noble. “Now that the capital market is free to develop its true potential, I am sure that more British investors will look into Romania. The United Kingdom is the country of origin of the largest investment funds in Europe, and the opportunities here are extraordinary.”

Within the FTSE global equity indexes, the FTSE Russell classifies stock markets across the globe into four categories – developed, advanced emerging, secondary emerging, and frontier. FTSE Russell calculates thousands of indices that measure and evaluate markets and asset classes in more than 80 countries and regions. Poland is currently the only country in emerging Europe to have achieved developed status.

The BVB has had a good 2020 despite the Covid-19 pandemic, with listings in excess of 500 million euros in the first eight months of the year. In total, eight issuers, including the Romanian state via the ministry of finance, have successfully managed to attract financing since the beginning of the year.

“It is a strong signal, even amid this pandemic, that accessing multiple sources of financing, including the capital market, is part of a healthy mix for any economic activity,” says Radu Hanga, president of the Bucharest Stock Exchange. “Both private companies and the Romanian state have successfully managed to attract vital capital through the BVB in order to keep the economy moving. The investment universe is expanding rapidly for investors who are active on the Romanian stock exchange. The stock market is constantly expanding and we have received encouraging signals from authorised intermediaries that more issuers are getting ready to access the capital market.”

According to Adrian Tanase, CEO of BVB, more and more local investors are also looking to the capital markets. “They are looking for superior returns for their savings,” he says. “The stock market must be a representation of the economy, a representation where equity and bonds are the basic financial instruments. We want to offer investors, existing or potential, the opportunity to access the capital market according to their risk profile so that they can implement their various investment strategies.”

The Romanian Banking Association has now set its sights on full emerging market status.

“That’s our strategic objective,” it said in a statement.

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