High trading costs, shrinking liquidity, few attractive listed companies, and, most of all, upcoming competition from other capital markets. This is the almost critical situation of Romania's two markets - the Bucharest Stock Exchange (BSE) and Rasdaq, which has made the officials of the two organisations start giving merger some serious thought.
The merger would put an end to the abnormal existence of two markets where the daily joint value of transactions rarely exceeds one million dollars. Which is several times smaller than the Hungarian figures, where there is only one stock exchange.
The idea of a BSE-Rasdaq merger has been often tackled by the officials of the two institutions in the past year, but no official stances have been taken so far.
However, the weak evolution posted by the two markets this year and the capital account liberalisation (which allows Romanians to make direct investments on other European markets) have forced the BSE and Rasdaq chairmen to admit that merger is a must.
"We are one of the world's most expensive markets in terms of trading costs, which situation was also triggered by the existence of two stock exchanges. Moreover, there are other stock exchanges in Europe that are much stronger than us and they decided to merge in order to become cheaper and more liquid, both for investors and for the companies. Under the circumstances, the BSE-Rasdaq merger is the obvious solution needed to resist the consolidation trend," Sergiu Oprescu, chairman of the Bucharest Stock Exchange, told Ziarul Financiar.
"The local market will directly compete with the international markets, first-rank issuers (i.e. companies) will gradually give up on local markets in a bid to get better financial arrangements on the international markets, while the Romanian investors will also start favouring the international companies. All these future trends are natural and the wisest thing for us is to merge the Rasdaq market with the Bucharest Stock Exchange by 2005," says Cristian Siminel Andrei, president of the National Association of Securities Companies (ANSVM), owner of Rasdaq.
In fact, Andrei will present the merger plan during the General Meeting of ANSVM this week.
The Bucharest Stock Exchange and Rasdaq are both controlled by the Romanian brokerages, under different forms of ownership. The BSE is an association (with the brokerages as members) that owns the stock trading system, while Rasdaq is a limited liability company, owned by ANSVM. Irrespective of their internal structure, the two markets are still not deemed as potential financing sources by the Romanian or international companies. Foreign investors do not think of them as sources of income, either.
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