Adrian Tănase, chief executive officer of the Bucharest Stock Exchange:
“Romania is a dynamic hub in Eastern Europe and collaborations between local and international stakeholders continue to present new opportunities.”
Bridges: What recent developments have taken place at the Bucharest Stock Exchange (BVB)?
Tănase: “We dive deep into understanding the market landscape and fostering relationships which benefit our financial ecosystem. It’s impressive how much Romania has transformed in the last few years. The domestic investment landscape has matured significantly and we are seeing the emergence of new opportunities across the spectrum; especially as disposable incomes increase. Our strategic objective is to position the stock exchange as the main financing channel for local companies, alongside the banking sector, and to raise awareness amongst local authorities to the role of the capital market in Romania. We deliver fiscal incentives in relation to capital gains tax, which include a simplified tax payment system.
We introduced Fidelis government bonds for Romanian individuals in 2020; an investment of almost US$7 billion. The Ministry of Finance and the Financial Supervisory Authority also created a strategy to develop the capital market last year based on OECD recommendations.
BVB is developing programs and supporting initiatives to transform Romania’s capital market.
Adrian Tănase, Chief Executive Officer of the Bucharest Stock Exchange
BVB is developing programs and supporting initiatives to transform Romania’s capital market. These include attracting new investors and Romanian entrepreneurial companies to the stock exchange, developing market infrastructure, improving the financial education of market participants and promoting good governance.
BVB is working closely with the European Bank for Reconstruction and Development (EBRD) to revise the Romanian market’s corporate governance code in line with recent regulatory changes and current international standards.
BVB also manages programs with Envisia, Romania’s first business school. and the Romanian Investor Relations Association (ARIR).
The easing of money market conditions is expected to lead to more Romanian companies listing on the exchange. BVB is in discussions with companies which have put their listing plans on hold and this is driving confidence that once conditions return to normality, more companies are expected to come to the market.
There is a strong domestic investor base in Romania. In June 2024, investment funds held assets of RON 46.4bn (EUR 9.3bn) with a record number of almost 800,000 registered investors. Household deposits have grown almost constantly in recent years, reaching RON 353.7bn (EUR 71.2bn) in June this year.
The number of retail investors has continued to grow over the last five years, along with the increase in the visibility of the Exchange and the number of companies coming to the market, proof that the steps the BVB has taken to develop the market are in the right direction.
With the participation of the Bucharest Stock Exchange, the Financial Supervisory Authority, the Ministry of Finance, banks, financial investment services companies and fund managers, next steps are being implemented.
“We want to see this dynamism translate into increased liquidity,” says Tănase. “Average daily liquidity in the first half of 2024 amounted to US$31million, eighty seven percent higher than the same period last year and our market capitalization is around US$77billion, a historical high.
“We have an invigorated capital market and a dynamic local institutional investment community. There’s a bright future ahead as governmental strategies are aligning to build capacity in the financial sector and this will undoubtedly lead to a healthier investment climate.”
In the region, while Romania has become the largest capital market after Poland and Austria, liquidity remains a challenge. BVB is almost ready to have the Clearing House operational and is looking into launching single stock, equity and energy futures..
What opportunities do you see for foreign investors in Romania and Central-Eastern Europe?
The Bucharest Stock Exchange offers a unique opportunity for foreign investors seeking diversification and access to a promising Eastern European market. Foreign investors currently account for approximately twenty six percent of the trading activity on the Bucharest Stock Exchange.
Today we have fifteen companies with a presence in the Financial Times Stock Exchange (FTSE) indices, this is compared with just three companies in 2019 when Romania was upgraded to a secondary emerging market. In the Morgan Stanley Capital International (MSCI) indices we have thirty companies. Romania presents a compelling investment case for several reasons:
- Growth potential: The Romanian economy is on an upward trajectory, offering access to promising companies positioned for future success.
- Romania’s European Union (EU) membership: This ensures a stable regulatory environment with established legal frameworks familiar to foreign investors.
- Under-valued potential: Many Romanian companies offer attractive valuations for early investors. There has been positive evolution recently, both in terms of valuations and index performance:
Accounts simulations for the last 25 yrs. RON 100/month recurrent investment (Jun 1999 – June 2024) in RON
BVB prioritizes investor confidence by adhering to strict regulations:
- EU Harmonization: Romanian regulations are aligned with EU directives, ensuring transparency and investor protection standards.
- Independent Oversight: BVB operates under the watchful eye of independent regulators who enforce fair market practices.
- Investor Protection Measures: To safeguard invested capital, BVB implements mandatory disclosure rules and investor compensation schemes.
How is BVB helping to strengthen the Romanian economy?
“The success of the last initial public offerings (IPOs) shows that retail investors are becoming more active and are willing to deploy significant amounts of money when serious investment opportunities arise. In the recent Premier Energy IPO, retail investors’ subscriptions accumulated over RON 1billion, covering 140 percent of the offer.
‘BVB Arena’
“In 2017 we created an ecosystem for financing alternatives and a place where companies can train people and cooperate with partners. The BVB Arena program can be compared to an antechamber for companies that subsequently come to the capital market and issue shares and / or bonds. Over twenty companies have already done so with their financing rounds amounting to almost 240million euro.”
“We are seeing more Environmental, social and governance (ESG) bonds issued by banks, companies and municipalities. While the banks were the first to issue green-bonds, companies and municipalities followed shortly after and the twelve bond issues with an ESG component carried out since 2021 amount to more than 1.7billion euro. Green-bonds were issued by Romania’s Ministry of Finance in February 2024. These had a total value of 2billion euro for twelve years, at a yield of 5.734 percent and an interest rate of 5.625 percent per Anum.”
Nurturing ESG Initiatives
In September 2020, BVB, with the support of EBRD, launched the first ESG-focused initiative on the Romanian capital market with the aim of providing high-level ESG information for companies listed on the BVB.
April 2022 saw the ESG reporting guidelines published and these provide a framework for listed companies to improve their ESG reporting and align with future EU regulations.
BVB offers courses and workshops on ESG through partnerships with organizations such as Sustainalytics, one of the global leaders in the ESG research and rating segment, and IFC, a leader in the ESG space.
BVB Research
The BVB Research platform www.bvbresearch.ro publishes ESG scores for twenty-two listed companies on both the BVB regulated market and the AeRO market.
Primary Market Data
+ 5 transfers from AeRO to Main Market – Bittnet (2020), Chimcomplex (2022), Safetech and Arobs (2023), Holdingroc1 – Roca Industry (2024).
What message do you have for institutional investors regarding the Bucharest Stock Exchange’s mission to develop stronger international ties?
“Thanks to the country’s economic growth and political stability, Romania is viewed in a positive light by the international community. Thanks to this image, and the trends we are seeing in external markets, BVB will continue to provide important returns for investors.
Thanks to the country’s economic growth and political stability, Romania is viewed in a positive light by the international community. Thanks to this image, and the trends we are seeing in external markets, BVB will continue to provide important returns for investors.
Hidroelectrica’s listing one year ago (H2O) was in the world’s top five largest listings. This had a significant impact on BVB’s image in Romania and on the international stage, as this record was set in a complicated period of high inflation, high cost of money and geopolitical tensions. This proves that investors are always attentive to opportunities, even in challenging times.
The Romanian market is now in the same league as the best-covered markets in the region; namely Poland, the Czech Republic and Hungary. The success of Hidroelectrica’s IPO demonstrated that the local market can sustain bids in the billions of euros compared to the previous record highs of several hundred million euros in Romania. The offer showed that international and local investors are willing to dislodge large sums of money when offered an investment opportunity with strong growth prospects.
The ‘buy side’ continued to increase thanks to new retail investors in the market, increasing assets within private pension funds and new inflows in mutual and passive investment funds. BVB will continue to evolve. Signaling confidence in our country’s potential, BVB was promoted by FTSE Russell as a secondary emerging market and we hope to soon be promoted by MSCI. We look forward to implementing new projects to increase participation and reactivate the primary market this year.
Increasing liquidity is in the epicenter of our strategy and we are addressing this by targeting new issuers, local and international investors and creating financial tools which provide investors with improved portfolio management. Romania has a robust framework for growth. Here at the Bucharest Stock Exchange, we are eager to engage with international investors and enhance our market visibility and networks. The Romanian advisory landscape is becoming increasingly attractive to Asian investors, we will continue to actively nurture our strong ties with our friends in Japan, Asia and the world.”
