Mihai Nichisoiu, Vanguard: Romanian investors shift focus to other financial instruments than stock market

There is an inflow of investors on the international markets

Investors seemed to shift focus recently from Bucharest Stock Exchange to different stock-based financial instruments, both in terms of approach and risk aversion.

“Investors have a variety of financial instruments, commodity or stock exchanges or foreign currencies to choose from, which from the standpoint of fundamental premises, is becoming more and more interesting – that of governmental treasury notes”, Mihai Nichisoiu (photo) explained.

One of the incentives for the trading spree at Forex market is the advantage of going for long or short-term position. “The traditional investor has a “long only” mentality. This kind of strategy would have turned out to be a failure last year, but this is not the only option available in the international markets”, he added.

Unfortunately, the shift from domestic market to the international market is heavily pursued in Romania, because Romanians still lack in a mass-tradition investment, he explained.

A speculator in forex market must be highly flexible and dedicated to trading activity, if he plans for a short time-horizon investment. “The market is continuous and you always must be alert on the news, price variation, and the tolerance band. You can’t always afford the luxury to wait a few weeks before making a move, because the trend can turn against you, with 30-40 percent losses or even more on portfolio”, said Mihai Nichisoiu.

Risks of speculation on Forex market

Any potential investor must be aware of the risks arising from these financial products which are direct proportional to the profit-making opportunities.

The primary risk is that of the margin – a small amount can influence positions of sometimes even 100-fold bigger.

“This aspect boosts both the losses and potential earnings. At a 1% tolerance band, we have a 100 to 1 leverage ratio, and this type of transactions doesn’t leave too much space for error. Thus, if we come from BSE, where there is tolerance-band transactions, there is the possibility of a poorly-managed risks arising from Forex market”, said Nichisoiu.

Another aspect that the investor must similarly care for is the financial education, a field in which Romanians are not so good at.

“Even if a forex chart is very much alike with a stock chart, the stories behind each one of them are very different”, the analyst explained.

Thus, each portfolio must be accurately structured given the risk profile and strategic approach of trading – characteristics which sometimes differ at the level of market watchers.

There are various advantages of this financial product, such as mounting liquidity of the market, around-the-clock trading and free and direct access to streaming news.

“I don’t believe in conventional theories of the financial markets”

The global financial crisis has ruffled visible effects throughout the entire world, from financial markets to real economies, the Forex market being marked by wide-bandwidth variations in times of financial turmoil.

“The financial crisis offset a remarkable volatility in the currency markets as well. Forex speculatious would have benefited of lighter trading conditions compared to stocks or commodities”, specialist explained.

He expects the market volatility to continue this year at the same pace. “I believe the variation bandwidth will continue to be wide on all markets, stocks, commodities and currencies”.

As for the future dynamics of the crisis, and its effects, Nichisoiu says it is too early to predict, him being a partisan of conventional theories in financial markets.

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