Romania growth aids stocks

BUCHAREST – Romania’s stock market, hit by the downturn in global financial markets, has sound potential for a rebound as investors will be lured by a fast-growing economy, the bourse chief executive said. Stere Farmache told Reuters he believed the market, whose blue chip index has lost one-third of its value in the last six months, would show a three-fold increase in market capitalization over the next three to four years. He noted «there haven’t been major fluctuations» in the presence of foreign investors in the market as a result of the global upheaval caused by the US subprime crisis, with their share of overall holdings oscillating around 45 percent. «Eventually, investors will need to make a decoupling… because apart from the impact coming from external factors, the Romanian economy is growing and the performance of locally listed companies is clearly not worse than last year.» Analysts estimate the Romanian economy grew a hefty 5.9 percent in 2007, and foresee gross domestic product expanding 6 percent this year. Farmache said the global woes have put on hold some planned initial public offerings, while plans to float minority stakes in nuclear power operator Nuclearelectrica and hydropower utility Hidroelectrica are under way. He did not want to elaborate on how advanced such preparation was, because listing timings would be decided by government not by the bourse. Analysts said government-planned IPOs of such energy firms this year will breathe new life into the new European Union member’s bourse, following the 2006 listing of 10 percent in power grid Transelectrica and of gas pipeline operator Transgaz this year. Farmache said Austria’s Erste Bank, which is the majority owner of Romania’s leading bank BCR, is expected to be listed on the local market in mid-February. The Bucharest stock market’s capitalization is around -20 billion, way below that of Central Europe’s biggest single stock, Czech power producer CEZ, and just a tiny fraction of the most developed Warsaw bourse. But he noted it has potential for development both at home and in the region, adding, «We are carefully assessing all the opportunities that might emerge regarding possible alliances or – why not? – acquisitions.» He spoke against a background in which Greece’s Hellenic Exchanges and Poland’s Warsaw bourse have expressed interest in acquiring Slovenia’s Ljubljanska Borza as part of regional expansion plans in Central Europe. Asked whether the Bucharest exchange was considering plans to launch a takeover bid for the Slovenian bourse, Farmache said it was «potentially interested.» «The Bucharest bourse is one with development potential. It functions in a country with a sizable dimension within the European Union, thus the area of its activity can be expanded, so we don’t rule that out,» he said.