Brokers: Economic woes in the region drag down the local stock market

Last week started with major declines at Bucharest Stock Exchange, as economic woes in Central and Eastern Europe casted a shadow of pessimism on the trades, ballooned by the poor earning reports of issuers. Brokers say the premises are not very optimistic, but the economic uncertainties make the trend predictions impossible.

Stock market trades, under the shadow of pessimism

In yesterday’s session, BET indice that gauges the performance of ten most liquid shares fell 4.46%, while BET-C dropped 4.17%. BET-FI indice, of the five financial investment companies lost 6.15%, while ROTX indice at Vienna stock exchange slumped 4.85%.

BET-XT, the indice that assesses the evolution of 25 most liquid stocks, slid 5.17%, and BET-NG dropped 3.10%.

“We have early week trades highly affected by the Eastern Europe woes. The aspect grabbed all media headlines and economic debates in these countries where the systems call for rapid anti-crisis responses. However, Romania is included in this list, and it this is what brutally dragged down stocks yesterday. The preliminary earning reports of issuers had the same negative effect, while the prospects for 2009 are still somber. The investors were gripped by fear and disappointment and therefore, we had a negative reaction”, Gabriel Necula, broker at Prime Transaction told Wall-Street.

Nicu Grigoras, broker at Interspatial Invest said the factor that had bottomed stock prices yesterday was the connection of the local market with the evolution of foreign markets.

Last week, we have seen an opposite evolution of the local market, of FICs especially, compared to external tradings.

“Most of the foreign indices relapsed to October-November lows, and BET-FI had six successive bullish sessions. The positive evolution amid generally bearish European markets, proved to be ungrounded and triggered a more consistent decrease of the local trading in the current session”, Grigoras explained.

Another element that drove quotes to significant declines is the negative sentiment of investors toward the Central and Eastern Europe, which was visible in the consistent depreciations of emerging currencies in the region, said the broker of Intercapital.

“Many foreign investors plan to exit the market due to the worsening macroeconomic signals”, he explained.

Apart from the poor financial results of certain issuers, and the last week’s failed rally on FICs, it seems that the most important reason is the negative situation in the region.

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