Highlights of 2008 capital market

Financial crisis erupted last year in United States from the high number of defaulting borrowers with subprime mortgages, leading mortgage lenders to bankruptcies.

The pitfalls of the American equity market date back in August, when central banks started pumping liquidities into the system. The crisis spread throughout the world’s stock markets, including BSE. The last year’s fallout influenced the global market even since day one of 2008, when the so-called “January effect” did no longer occurred after nine successive years.

There are several major international events of 2008 whose intensity and importance will surely make history.

“However, the stock market was not influenced by isolated events, but by a chain of events, some more important than others, and each one of them had an influence in the evolution of the global economy,” said Andreea Gheorghe, manager of analysis department of Intercapital Invest.

“A year ago, Wall Street stock market, as any other financial market in the world, was rallying to all-time highs, and most of the analysts, investors and actors of the financial landscape did not imagine that it would go back to such a steep decline in such a short time. In my opinion, alarm signals were triggered ever since 2007, when many investment trusts started to ready exits from various financial markets. However, one of the highlights of 2008 it remains the fallout of US banking system, which spread across the world , and that was the starting point of the stock markets’ meltdown”, Rares Sofariu, research and development manager of KD Capital Management told Wall-Street.

Early 2008 – five initial public offerings, plus Erste

“The year 2008 marked the demise of Wall Street we knew until now, and this will make history. We had a large-scale financial crisis, which turned into an economic nightmare, both for developed and developing countries. The recent events triggered a 180-degrees reversal of the central banks and governments of the countries around the world”, said Andreea Gheorghe.

Only six companies launched their initial public offerings at Bucharest Stock Exchange, including Erste Bank, the first international issuer at Bucharest trading.

A day of March was marked by steep declines of stock market indices, followed by several bearish sessions, due to the pessimistic statements of Dinu Patriciu.

“Patriciu moment”, March 20, 2008 influenced the early-year evolution at BSE, thus heralding second-half lows. Dinu Patriciu said “Romanian stock market is at the beginning of the fall”, and “will keep on falling in the coming months, due to the global financial market”. Patriciu added that the value of the capital market was twice higher than the “real level”.

His statements had a forceful impact on the investors’ sentiment, triggering a major selloff spree. In the next session after Patriciu’s statements, Bucharest Stock Exchange recorded a historic sharp fall of quotations.