International rating agency decided yesterday to cut Romania’s rating, cutting it below the investment grade. Fitch’s decision comes about two weeks after Standard & Poor’s reported similar review. Although S&P dented the trading session at Bucharest Stock Exchange, the Fitch’s downgrade had no major impact on the market.
Fitch rating downgraded Romania’s ratings for long-term foreign currency IDR from ‘BBB’ to ‘BB+’ and for long-term local currency IDR from ‘BBB+’ to ‘BBB-‘.
The two-notch downgrade reflects Fitch’s concerns about the macroeconomic policy framework in Romania and its ability to avert a severe economic and financial crisis.
Specialists polled by Wall-Street think the low prices of shares included this type of events, and the second rating cut had no effect in the yesterday’s trading session.
Late October, when S&P announced one-notch downgrade for Romania, indices at the stock exchange closed the trading session on major slumps. Indices of financial investment companies (SIF), BET-FI and the indice of energy companies, BET-NG registered the biggest declines, of over 9.81%, respectively 10.95%.
However, the yesterday’s buying spree of investors was not dented by the analysis report issued by Fitch, the indices closing session on major increases.
Equity market will not be impacted by the second successive downgrade of the country rating, said Andrei Ciubotaru, broker at Vanguard.
“In theory, the capital market should follow the same response as in case of previous downgrades, but investors had a neutral reaction, the growths evolving in the same terms as in previous ones”, said Marcel Murgoci, operation director at EstInvest.
Considering the fact that there are countries in the region with weaker economic indicators than Romania’s, and their ratings were not modified, analysts don’t rely so much in the agencies’ reviews, said Marcel Murgoci
Gabriel Aldea, head of Front Office department at Intercapital, said that on short term, the effect was not grasped and on medium term, the downgrade can lead to a reduction of foreign capital inflows, including at BSE.
“Fitch’s downgrade is in line with S&P’s latter review, and these decisions will surely have an impact over foreign investors, who consider rating as a major benchmark in investments”, he added.
TGN and TEL quotations, unaffected by agencies’ rating downgrade
After reduction of country rating by S&P, the biggest companies underwent a similar “path”. Among those listed at Bucharest Stock Exchange are Transelectrica (TEL), Transgaz (TGN) and Rompetrol Rafinare, part of The Rompetrol Group – downgraded by Fitch.
In the day Fitch cut the rating outlook for Rompetrol Group, RRC stocks slid 14.71% suggesting a concern of investors who trade the stocks, as the company is in permanent need for loans to continue activity.
Transgaz and Transelectrica shares had an opposite evolution in the day S&P cut outlooks, registering 3.06% growth respectively 9.71%.
Ciubatoru said he expects Fitch to make similar reviews for TGN and TEL, which will not affect Romanian investors, whereas Romanian companies will have a narrower access to foreign loans.
Translated by Camelia Oancea
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