Indirect link between stock market and consumers

The consumer - the dictator of the economic growth in the past years – is still living moments of glory in Romania. “Seen from distance, in a weekend day, in any hypermarket in Bucharest, it seems shocking that the shopping spree continues, almost the same as before” said Alex Stoian, partner with Prognosis.ro project.

He gave the example offered by the political figureheads in our days, “the attempt of slashing budget for 2009 by burdening it with salary growths which it is impossible to bear in the actual context. It takes time for the impendency and its subsequent materialization of the crisis to be felt”, he said.

Marius Pandele, Head of Research with Vanguard, says the consumers are likely to feel the effects of the dramatic declines at the stock market if the companies floated at BSE would manifest a higher level of dependence upon the funding via capital market.

“In a situation of this kind, companies will face major funding problems, which would affect consumers as well, sooner or later, especially if they serve companies in difficulty,” Pandele added.

Meanwhile, the outlook on national currency is not positive. Thus, Ovidiu Fer, analyst at Wood & Company says this will trigger repercussions on consumptions, especially on imported goods.

“Moreover, I think the expansion of consumer credit will temper down. Therefore, I think the consumers will be affected. Yet, this has nothing to do with the problems in Romanian economy and not necessarily with the slumps at the stock market,” said Ovidiu Fer.

Impact of declines at stock market will be low for those who are not involved

Even if the declines of the stock market have backed down market to 2003-2004 levels, and the prices slumped to all-time lows, specialists polled by Wall-Street say there will not be any forceful negative impact, generally speaking, because the stock exchange is not a major financing source for companies or economy.

“I see no major direct influences on consumers. In Romania, the capital market is not an important financing source for economy, and number of investors in the stock market is low. Certainly, the deepening declines of stock market stir up uncertainties on the financial and general economic climate of the country. However, certain companies that used capital market for financing may be affected”, said Razvan Pasol (photo), manager of Intercapital Invest.

In the actual status of Romania, there is an impact of the major slumps, but a low one and rather indirect.

“The factor that influence both the Bucharest trading and the consumers is the international economic crisis that will soon become local as well. Actually, it already is. It is at its infancy”, said the representative of Vanguard.

Specialists see a major downslide of the real estate industry

If the stock market was the first “fatality” of the global crisis, the other fields will not be avoided, even if the effects are starting to take shape barely now.

Wood’s analyst, Ovidiu Fer thinks that the most affected fields will be banking, real estate and retail.
Real estate sector is expected to face a major decline led by international turmoil.