Capital markets calls for liquidity and fiscal incentives
Now speaking from a different standpoint, BSE’s former number one adds a new dose of confidence-boosting medicine to calm stock-market talks, the only field he wishes to comment upon, before officially taking office at one of the most actively-involved banks in Romanian system.
The global financial crisis is severely denting all financial markets, and Bucharest Stock Exchange is surely not an exception. In an interview to Wall-Street, Stere Farmache unfolds BSE’s strategy for 2009, in the midst of financial downturn.
Beyond the regulation measures, the capital markets calls for sustenance of lawmakers, now more than ever, Stere Farmache stressing that promises made by the Executive have rarely took effect in the past years.
“I believe the capital market never pined for projects and pledges from the government, but very few came to pass. One of the Executive’s initiatives was “A strong capital market” program which started to pay off, but now it is blocked by the shaky economic conditions”, said Farmache.
Beyond the streamline of operating means and costs, BSE needs new products, new companies with significant free-float.
“Whether we want it or not, the battlefield is here. I am sure that if the stock exchange was better equipped, with strong companies, who would have drawn a wider institutional investor database, with medium to long term vision, its weakness to crisis would be more limited”.
The government, he added, should understand that the capital market can set into motion alternative financing mechanisms for companies who wish to have access to resources for their liquidity needs.
“One of the levers would be for the lawmakers to confer fiscal incentives to companies in distress by issuing financial instruments and I think this way, the companies would have more courage to using them. I am referring now to a reduction of tax on profit for listed companies, in order to ease financing via BSE”, BSE’s chairman explained.
Furthermore, Farmache thinks, adapting macroeconomic indices and their bringing back to an appropriate threshold would confer stability to financial market.
“Thus, I would divide these actions taken by authorities in two categories: measures addressed directly to capital market actors and measures to keep macroeconomic indices under control”, said Stere Farmache.
BSE plans to boost liquidity in 2009
Stock markets are now experiencing maybe the most difficult and complicated period, when investors need various products and elements that can confer diversity in the investment process.
“In these stormy times, investors act only from the strict standpoint of their relation with the stock market. The signals of a GDP decline, a wide-bandwidth volatility of the currency exchange rate, fears of inflationary evolutions, and a fall into a recession of developed economies are only few of the factors that incur the utmost prudence among investors”, said Stere Farmache.
One of the solutions would be drawing attractive issuers, which is a difficult measure in times of crisis. “Right now, Bucharest Stock Exchange has problems in persuading issuers to become publicly traded, due to the falling demand for financial instruments, while few are those who actually take this risk”, said the chairman of the institution.
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