Indices of Bucharest Stock Exchange slid 60% from all-time highs, quotations dropping to 4-5 year-lows and investors are seeing their portfolios taking a nosedive. In a first phase, part of a larger project, wall-street.ro, together with specialists at the stock market and investors is trying to identify the most important financial instruments that Romanian market needs in these gloomy times.
“For stock market recovery, the best spur would be a good management of economy and finding viable solutions to weather the effects of the crisis and to prove that the slumps at the stock market are overreacted. However, if the economy whose exponents are companies listed at the stock market will be severely impacted, then, the prices will probably be justified. This possibility is a dark shadow of the future, but unfortunately possible”, said Adrian Duna, analyst at KD Capital Management.
“There are many instruments not yet available at BSE, from short-selling, to warrants. It is hard to say whether they are the ‘wonder instruments’ in these times or not. One thing is clear, implementation of some of them, such as short-selling, would be difficult in a bearish market, and might lead to even bigger unbalances. This kind of products should be introduced and promoted when the market takes a normal path. It is not necessary to be a bullish trend, more important is the lack of high volatility,” said Florin Irimin, broker at Intercapital Invest.
Vlad Doruc, analyst at Vanguard does not think short-selling would be well-timed, as it would lay a bigger pressure at purchase than in the last period.
“Of course, options can be introduced (in case of BSE), although I don’t think it will be very successful as investors show no interest in futures contracts. It is advisable that these instruments to be introduced gradually, after the current instruments reach to a certain maturity, for the investors to get used to them,” said Vlad Doruc.
As for the financial instruments, specialists at SSIF KD Capital Management say there is no healing instrument at this point to animate the stock market.
“We think a bigger involvement of BSE in ensuring a better liquidity of the derivatives market would be welcomed. For the moment, the only way to short-sell, through possible costs cut of access to derivatives market. Moreover, the price of state securities and bonds face a liquidity drought. These instruments that are useful in a bearish market carry this liquidity risk, which makes a large investment in these instruments via BSE problematic”, Adrian Duna explained.
The recent decision of Romania’s biggest broker KBC Securities, also stockholder at BSE of selling 1.672% stake spawns new fears among brokerage companies that are also stockholders at BSE.
“The propositions to draw into BSE shareholdership foreign capital, represented by other foreign stock markets, propositions that were not adopted last year, when BSE had positive results, could be now regretted,” analyst at KD Capital Management added.
Translated by Camelia Oancea
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