IMF loan could herald fresh stock market rebound

Romania’s talks with IMF and other financial institutions have come to fruition yesterday, when the local authorities have officially announced the rescue package would amount to roughly 20 bln euros. Market experts polled by Wall-Street say the aftereffects of this agreement over the capital market should be seen from the perspective of minimized country risks.

The loan will not give bears the upper hand
The two-year standby agreement with International Monetary Fund consists in 12.9 bln euro funds from a total 20 bln euros rescue package. The first installment, of 5 billion euros will be transferred within few weeks, once it is approved by IMF board.

The yesterday’s stock market evolution was mixed. If the official announcement of the loan has instantly sparked mild decreases, the indexes bounced back toward the closing bell.

Experts polled by Wall-Street say there are no underlying reason for the bears to gain upper hand after the loan agreement has been officially made public.

“It is very important to overcome this after-moment induced by generalized panic and confusion. We should expect contrasting evolutions of listed stocks. For instance, the chemical fertilizer sector may take the traders by surprise same as companies that announced dividend payout”, said Silviu Enache (photo), manager of SSIF KD Capital Management.

Alin Brendea, manager of Prime Transaction says BSE has no reason that can send the market to the bottom in this context. “This agreement offers additional arguments for minimizing risks arising from investments in Romania. Minimizing the country risk should engrave higher appeal to Romanian assets”, he explained.

Compared to Hungary, that contracted a loan from IMF in October 2008, the response of the BSE was the exact opposite. If the Budapest Stock Exchange sank at the first rumors, it bounced back when the loan was signed,” Brendea concluded.

Nevertheless, both the internal climate and global context are different for the two countries. “In case of Romania, the IMF rescue package is designed to secure stability, and this signal sent to external financial markets could actually be positive”, said Enache.

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