What measures do SSIF managers use to encounter liquidity crisis

Confident Invest: We will probably remain on deficit another year

The sharp downdraft of flows at Bucharest Stock Exchange has affected the utmost of the SSIFs, especially the independent ones, who don’t enjoy the support of any financial group.

Confident Invest is the Financial institution of Electromontaj Industrial Group, that targets small shareholders and possible clients with portfolios below 100,000 euros.

Thus, SSIF’s situation is not exactly positive, as part of the agencies were already shut down late last year.

Nicolae Ghergus (photo), director of Confident, said the management of the company has already taken measures to weather the effects of the liquidity crisis, whereas the effect of low market flows was fatal.

“We have already downsized out network, by removing unprofitable units, which is actually a little later than we should, and this type of measures always have a delay margin. The effect of a shortened market flow was in fact disastrous, SSIF revenues fell 70-80% in 2007, comparative indices’ decline, we closed year with a bearable loss, as we continued the growth pace of our market share. By the measures taken, we will probably remain on deficit for another year, maybe”, he said.

According to Ghergus, the biggest problem at this moment is that there is no perspective nationwide, for the moment.

“The market share may grow, but if the market has null values, it doesn’t bring me any comfort that other players are ‘dyeing’ before me, if the same thing will happen to me, if the crisis spreads through next year”, Ghergus continued.

“The only way out of this dangerous loop is the access program for international markets initiated by the entities of the equity market, by establishing an ‘introducing broker’ at the level of BSE Group or Brokers’ Association. The other solution is the initiation of a program to be materialized in issuing of fixed-income instruments such as bonds, in order to diversify the financial instruments array for low risk-appetite investors”, manager of Confident Invest concluded.

Vanguard: We take the right project costs control

The liquidity shortage at BSE is affecting all brokerage firms at different extents.

“Even if in 2008, Vanguard’s market share increased by 32%, the overall value traded on BSE via Vanguard fell 39%. It is obvious that the firm’s earnings from deals at BSE declined. Unfortunately, 2009 doesn’t seem to bring any major positive change in terms of liquidity,” said Mihaela Biciu, CEO at Vanguard.

Fortunately, she continued, the deals on external markets have reduced the dependence of vanguard to BSE, although the effects of the crisis will dent the flows of the market.

“We ‘don’t save money at any cost’, but we thoroughly control spending for projects that can’t be confirmed as profitable in time, and thus, we will relinquish some of them. However, we will continue investing in technology and performance of the platforms for users. Although we have approved the budget plan for 2009, the grim status of the equity market drives us into monitoring closely the earnings and spending on a monthly basis. And if needed, we will reset the budget and measures on a quarterly basis”, Biciu added.

Vanguard’s manager sees no positive perspective for this year, which will not be easy to get through easily by any market player.