After several months that brought hefty gains to investors on the Bucharest Stock Exchange, a steep downwards trend is becoming increasingly apparent. In the past two weeks, the capital market lost some $400 million, subjecting investors to huge losses.
Petrom stock dropped some 15% in a single week; the Romanian Development Bank (BRD) fell 15% in a month; the Financial Investment Companies (SIFs) saw their stock price spiral downwards in several days; and Rompetrol Rafinare (Petromidia Refinery) lost about 20%.
In fact, most stocks have slumped over the past two weeks, with the BET-C index (which mirrors the evolution of all traded stocks) dropping 8% from the all-time-high reached on April 23. Market capitalisation has dropped from $5.6bn to $5.19bn in only two weeks. The players that have invested their money in the above-mentioned stocks since the beginning of the year are still in profit, while those that invested during the last month are incurring heavy losses.
For instance, SIF stock prices have increased 30% since the beginning of 2004, but have actually dropped 8-9 percent over the past three days.
The situation is even more spectacular in the case of Petromidia. Whoever bought into the refinery in early April (when the company was floated) has seen their investment double in the meantime. On the other hand, investors that purchased Petromidia stock at 740-780 ROL/share last week have lost about 20% of their investment.
Brokers have blamed the sudden drop on the fact that the market has experienced too rapid growth. "Growth has been too big this year. Analysts were forecasting 40% stock price increases for 2004, but this target was attained after only four months. The SIFs, which had recorded the biggest growth, are now coping with the most severe price slumps," explained Valentin Ionescu, head of operations at Euro Invest Vision. According to Ionescu, the market is dominated by speculators, especially Romanians, who make short-term investments.
The Bucharest Stock Exchange has been growing for almost three years. For instance, in Q1 2004, it surged 30%, a growth rate that most analysts had expected for the entire year.
Since early 2002, the prices of most of the big stocks have doubled or even tripled, as the economy is showing signs of recovery, as increasing numbers of investment funds enter the market, and as more Romanians invest their money on the capital market.
The soaring stock prices have led to a peculiar situation: most stocks are currently overrated or are being bought for their anticipated future performance, rather than for their current showing.
The floatation of Rompetrol Rafinare (Petromidia Refinery) is one of the main factors that fuelled the capital market's declining trend. Many investors rushed to sell stocks of other big, listed companies in order to buy Petromidia shares, which are credited with significant growth potential.
The Bucharest Stock Exchange indeed witnessed some "dry spells" last year, though the overall trend was encouraging, with the BET index ending the year having grown by 30%.
The decline continued yesterday, when the BET index dropped 1.31% and the SIF stocks lost 5.26% on average.
laurentiu.ispir@zf.ro ; vlad.nicolaescu@zf.ro
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