This year started with the burden of a global financial crisis that changed the fundamental values of capitalism and walled the entire financial world. Predictions for 2009 don’t look very promising, while experts’ expectations are focusing rather on how Romanian economy will find the tools to overcome the economic downturn.

Monetary funds are expected to grow in volume

Mutual funds market depends directly upon the evolution of the stock market, which is expected to continue its bearish trend, at least in the first half of the year. However, money-market funds will have the most to gain, their up spiral being signaled since 2008.

“Investment fund market will keep developing in Romania, being stimulated by monetary market’s opportunities, which yield in high positive interests. Apart from the attractive yields, the money-market funds will grow in volume stimulated by the banks’ distribution efforts”, Mihail Ion(photo), manager of Raiffeisen Asset Management told Wall-Street.

In the midst of global crisis, where the financial system has been bogged down, we are wondering if the asset database of mutual funds will increase this year.

“In times of crisis marked by a thirst for liquidities, we will probably witness a massive cash withdrawal from mutual funds. Combined with broad stock market volatility, I think the share funds with large exposure and diversified funds will take the heaviest losses”, said Cosmin Brendea, manager of Prime Asset Management, of the funds launched last year in Romania.

However, Mihai Ion expects the stock market’s bullish trend to be restored starting second half of this year and the investors to return in share funds.

“Diversified and share funds will gain back their popularity once the stock markets starts to increase. Even if we don’t have a predictable future, the most likely scenario signals a stabilization of developed economies in second or third quarter of 2009, which together with a loosening of monetary market and a low cost of money on international markets, will bring back investors in the stock market”, Ion added.

RAM manager added that if the new government would take the necessary measures to tackle unbalances and economic growth, then the Romanian stock market would become attractive again for watchers and quotations will spiral back up.

The lawmakers will have to make additional measures in legislation and administration designed to create incentives for the equity market.

“We are expecting the amendment of CNVM Regulation no 15/2004, in compliance with propositions of CNVM and AAF, that line up legislation in OPCVM and AOPC fields in terms with European regulations and international practices. We believe this will create an incentive for the development of asset management industry in Romania on medium to long term and will also lead to a growth in number of management funds, and will tighten competition as long as the number of operators authorized by CNVM continues to grow”, he explained.

However, it takes strong will from CNVM, “who put off again in 2008 the amendment of Regulation no 15/2004, for unknown reasons”.

“I want to believe that the Ministry of Economy and Finances will take into consideration our proposition, to change the Fiscal Code in order to allow the expenses supported by employer on behalf of the employee, namely purchase of stocks, to be tax-deductible in a range of up to 500 euros for each employee. The condition is that investment funds to invest at least 80% of assets in the local market, according to the draft” Brendea added.

The manager added that he had proposed this measure being convinced of the necessity of a prompt set of regulations to stimulate the saving using collective saving schemes.

Liquidity crisis grips investors

“Liquidity shortage creates profitable yields in interest-based instruments; therefore, money-market investors will be advantaged, given the negotiation power of high interests in money-market funds, to which is added the permanent traceability of profit-making opportunities in the market. Therefore, movement of investments in deposits to one bank to another according to interests preferred by depositors is executed by the management fund, while investors in funds are spared by this effort”, said Mihail Ion.

Share funds have been severely affected by the decline of quotations, according to the stocks’ share in the portfolio.

“As far as we are concerned, we will keep the profile of share funds, namely a high share of stocks within the portfolio. Even if it is mildly lowered compared to funds’ long-term configuration, we prefer stocks of issuers whom are less affected by the crisis”, he explained.

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