The performance of the shares on the Bucharest Stock Exchange (BSE) yesterday confirms that the market has started to follow a clear downward trend, dashing the hopes of brokers who had said the decline in prices represented only a temporary correction.
Investors are continuing to collect the profits they made in the first weeks of the year, with some expecting to be able to buy shares at even lower prices.
"We are witnessing a change in market trend and the start of decline. What matters now is the threshold at which the decline will stop," says Rares Nilas, manager of BT Securities, Banca Transilvania's brokerage firm.
In only three weeks since the peaks at the end of February companies listed on the market have lost more than 2bn euros, with the total capitalisation of the BSE falling to 12.3bn euros. The BET-FI index, which calculates the performance of SIF shares, has shed 22% since the end of February, while the BET index, which follows the most important shares on the market, fell nearly 12%.
The heavy fluctuations of the stock market since the beginning of the year have coincided with large fluctuations on other financial markets, with interest rates and the exchange rate also fluctuating heavily of late.
Brokers say that the negotiations with the International Monetary Fund (IMF) and questions relating to the signing of the accession treaty with the European Union in April, as well as the date when the new 10% tax on the gains from share transactions will come into force, are behind the market insecurity. In addition, say brokers, most of the share price increases at the beginning of the year were due to speculation, with prices now tending to drop to levels closer to the actual value of the listed companies.
"The uncertainties about the negotiations with the IMF - on which the signing of the accession treaty with the European Union could depend - are inducing a feeling of insecurity across the market," said Nilas. "The drop in prices was not caused by large trading volumes, meaning that foreign investors are hardly buying at the moment. Market growth is expected for April, after the signing of Romania's European Union accession treaty," he added.
The BET fell only 2.6% yesterday from Tuesday's level. The drop in prices for the financial investment companies (SIFs), the largest in recent days, has eased off somewhat, with their shares losing an average of 1.8% yesterday.
The most important contribution to the decline in market capitalisation came from Petrom shares, which shed more than 1,000 ROL since their peak this year of 5,300 ROL.
Stock market investors, however, even those that entered the market earlier this year, are still making profits.
"Looking at the prices, we can see they are higher than in January. It is only natural for the market to go down once in a while. I believe the uncertainties surrounding the matter of when the higher tax on capital gains is due to come into force are to blame here," said Valentin Ionescu, head of operations with Euro Invest Vision brokerage firm.
Prices of listed companies were more than 30% higher than early this year, with SIF's even increasing by 60% on the last prices in 2004. vlad.nicolaescu@zf.ro
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