The Stock Exchange shed 1 billion euros of its capitalisation yesterday, given that the blue chips lost almost 4% on the average. About 2.9 billion euros have vanished from the Stock Exchange since the beginning of the year, in addition to the almost 800 million euro losses on RASDAQ.
The BET index of the ten-most important companies lost 8.9% in the first six sessions of the year, while BET-FI, the financial investment companies' (SIF) index fell 11.3%.
Brokers say the main cause for the declines at the beginning of this year is the negative sentiment on the international capital markets that compounds the negative macroeconomic signals in Romania. Brokers' comments are getting increasingly more reserved, as they avoid estimating how long this correction will last. "What's lacking now is the foreign capital inflows that would usually drive the market up and some foreigners are selling. I believe 90% of the capital market performance is caused by the international crisis and a rebound of the Stock Exchange is conditioned on the situation calming down on the foreign markets," says Rares Nilas, head of BT Securities.
At present, brokers say the market is dominated by speculators, who are only helping to worsen the effects of the declines seen on the international markets.
"Many declines are caused by Romanian investors, who do no look at the fundamental data of companies and sell based on a sentiment. When foreign markets go down, they sell," the manager of a brokerage firm commented yesterday.
On the other hand, the sentiment on the international markets is negative and analysts from Wall Street investment banks are talking more and more often about the recession of the US economy. The preponderantly negative news of late has led investment funds with international operations to take a more cautious stand and reassess their risks. This strategy hurts emerging markets first, which are considered riskier in general, as funds require higher yields if they are to invest in such markets.
Still, the Romanian capital market was one of the most affected in the region at the beginning of the year, because of the negative macroeconomic signals, and the lack of powerful local investors to reduce the pressure to sell.
"Whereas there was a lot of money for Romania from foreign funds six months ago, now there is hardly a fund willing to invest on this market. Negative news on foreign markets and the signal that the National Bank of Romania sent out by raising the reference rate are fuelling investors' distrust in the market," believes Octavian Molnar, manager of IFB Finwest brokerage firm.
Brokers also say that companies publishing their preliminary financial results for 2007 starting from the end of January will not calm the market down, as investors generally expect results to be good.
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