Bucharest Stock Exchange 2007 - Performance Review
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Bulevardul Unirii, Nr. 19
Cladirea 4B, Etaj Parter
040103 Bucureşti, Sector 4
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Bulevardul Carol I, Nr. 34-36
Etaj 10
020913 Bucureşti, Sector 2
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www.tradeville.eu
In 2007, the Romanian stock market performed well, especially throughout the first seven months of the year when the indices reached historical highs. During the summer months, before the international market turmoil became an issue, the market had a great performance, most of the major blue-chips as well as numerous small-cap companies listed on the Rasdaq market gaining significant ground. It seemed that the stock exchange was following the gain pattern observed in the former communist countries that joined the EU three years earlier. Nevertheless, the market dropped in the last quarter seeming to be contagious to the volatility of mature international financial markets.
The BET index that follows the evolution of the most important 10 companies on the Romanian stock market reached a new historical high level of 10,813 points from the starting level of 1,000 points. The BET-C index reached levels above 7,400 points within a couple of days, and the BET-FI index exceeded 95,000 points. However, by the end of the year, returns were below the historical highs marked during summer. The year-on-year returns were: BET: +22.05%, BET-C: +32.64%, and BET-FI: +24.85%.
The structure of the BET index was modified on August 27th, chemical plant Oltchim (OLT) and fertilizer producer Azomures (AZO) being replaced by financial services company SSIF Broker (BRK) and pharmaceuticals company Biofarm (BIO).
On September 14, the trading of futures contracts on the BET index was introduced to the Bucharest Stock Exchange, the first day’s turnover adding up to some EUR 62,700. The new instrument is a fair means for investors to counter market volatility risk. In neighboring markets, index derivatives account for 15-20% of daily trading volume.
Main stock market events
IPO segment
The most long-awaited event of the year 2007 was probably the listing of the second state-owned utility company SNTGN Transgaz SA (TGN) on the Bucharest Stock Exchange, which took place in late November and early December. The new issuer holds natural and statutory monopoly over the Romanian gas transportation sector. Transgaz issued 1,177,384 new shares resulting in a 10% free-float after the IPO, raising EUR 67 mn from the capital market. The IPO marked a new record for our market, being 28.3 times oversubscribed, thus showing that investors had a great interest in this issue. Additionally, a number around 12,000 investors showed interest in this listing, which was a surprise to many.
Another major event in the Romanian capital market was the trading of allotment rights, giving investors the chance to sell their IPO or capital increase stocks immediately after the operation is completed. These instruments have been used for the first time with the Transgaz listing. When traded for the first time, the Transgaz rights (TGNR01) achieved spectacular gains compared to the IPO price.
At end of 2007 and beginning of 2008, there was another IPO running for Casa de Bucovina – Club de Munte SA (BCM), company operating in the tourism industry. This IPO raised around EUR 9 mn. Despite the fact that this issue was not so well received by investors as was the case of Transgaz, it still was oversubscribed by 1.42 times.
Related to an older IPO, some individuals preferred to convert their compensation amounts for the expropriation done by the communist regime into Transelectrica (TEL) shares. The first individuals compensated in such manner received Transelectrica shares at the beginning of July 2007.
The shares are expected to start being sold on the Bucharest Stock Exchange on January 2008.
Despite expectations of several IPOs in 2007, we can conclude that, in terms of market development, the previous year was below expectations with only one state-owned company going public and another one from the private sector. Romtelecom and “Proprietatea” Fund listings were also announced since 2006, and are still expected, along with the new ones of: Nuclearelectrica and Hidroelectrica (state-owned companies), STF Emergent, Romcolor, and Contor Grup (private-owned companies).
