Romania is on the last mile to be upgraded to Emerging Market, a status which will make the economy benefit from massive capital inflows, according to Bucharest Stock Exchange CEO Ludwik Sobolewski. “The Romanian capital market has now a chance, maybe for the first time, to have a big quick win because the upgrade of the whole environment into the family of Emerging Markets is now very close. We have this paramount objective which we need to tackle: to upgrade Romania to Emerging Market status,” Sobolewski said at a conference organized by the Bucharest Stock Exchange (BVB).
Billions of euros could be invested in Romania once the country gets upgraded to Emerging Market, which will have a huge positive impact on the local economy. “It took us four years to get us in the Watchlist of the FTSE Russell, and the upgrade would be a huge success for Romania, not only for the capital market. There is a huge competition to attract capital, and funds who are 20- 25 larger than current ones will be allowed to invest in Romania once the market gets upgraded,” BVB’s chairman Lucian Anghel said.
Romania is getting closer to meet the criteria of FTSE Russell and those of MSCI for being upgraded to Emerging Market, but the local stock market still needs big companies listed with a high free-float to achieve this goal. “Having private companies listed on the stock exchange is not enough to assure the liquidity needed to promote to Emerging Market is met. State companies are needed,” said Romania’S National Bank – BNR’s Chief Economist, Valentin Lazea.
All hopes are now pinned on power producer Hidroelectrica, the state’s most valuable company, which is expected to carry out an initial public offering (IPO) this year. “Bringing Hidroelectrica to market would really help to comply with free float criterion,” said Jim Stewart, Vicepresident at Raiffeisen Bank.
Romania is currently classified as a Frontier Market mainly due to the low liquidity of the shares trading on the Bucharest Stock Exchange when compared to other markets in the region, such as Poland, Hungary, and Czech Republic. In 2016, the average daily turnover on the BVB was EUR 8.1 million, slightly higher than in 2015.