Pri­vati­sa­tions to help BVB weather global in­sta­bil­ity

Top 100 See - - Top 100 Listed Companies - By Doinita Do­lapchieva

It's been two years since you were ap­pointed CEO of BVB. Look­ing back, what goals did you suc­ceed in ac­com­plish­ing and what did not go ac­cord­ing to plan?

It would be dif­fi­cult to in­di­cate a sin­gle area which was left un­touched. Ev­ery do­main which is im­por­tant for the ef­fi­ciency of the in­fra­struc­ture, and for the so­lid­ity of the cap­i­tal mar­ket in the long run, has been ad­dressed. I am speak­ing about reg­u­la­tions, trad­ing sys­tems, mar­ket data dis­sem­i­na­tion, education of in­di­vid­ual in­vestors, in­fras­truc­tural mech­a­nisms for liq­uid­ity cre­ation, mar­ket­ing towards in­ter­na­tional in­vestors, and many oth­ers. An­other as­pect re­lates to the pos­i­tive im­pact of our ef­forts on the liq­uid­ity and size of the mar­ket. I would like to un­der­line that we have now in Ro­ma­nia sev­eral "act­ing agents": the lo­cal reg­u­la­tor and su­per­vi­sor (FSA - ASF), the Cen­tral Se­cu­ri­ties De­pos­i­tory, and a num­ber of bro­ker­age houses, keen to en­hance their busi­ness.

What are your ex­pec­ta­tions re­gard­ing the planned sale of big state-con­trolled com­pa­nies via the bourse?

Only if we pri­va­tise through the pub­lic mar­ket, we at­tract new in­vestors and new funds, which are al­lo­cated not only to a com­pany pass­ing through a pri­vati­sa­tion process, but also to other listed com­pa­nies, be­cause the mar­ket as a whole be­comes safer and more at­trac­tive. The strat­egy of the BVB is to ease the ac­cess to the mar­ket for lo­cal in­di­vid­ual in­vestors, lo­cal in­sti­tu­tional money and for global in­vestors. All these three cat­e­gories showed in­ter­est towards IPOs re­sult­ing from the pri­vati­sa­tion process. We do not com­plain of not hav­ing enough clients. What we ur­gently need, are in­vest­ment tar­gets for them.

What are your ex­pec­ta­tions re­gard­ing IPOs of pri­vate com­pa­nies by the end of 2016?

We ex­pected a kind of turn­around in that area this year, but the mar­ket con­di­tions have not been favourable. De­spite this ad­verse sit­u­a­tion we man­aged to open a new mar­ket for small com­pa­nies, which has so far at­tracted four pri­vate com­pa­nies, and some of them con­ducted lim­ited pri­vate place­ments of shares. Now is a good time to strengthen our ties with po­ten­tial en­trepreneurs that are con­sid­er­ing go­ing pub­lic. We need to have bet­ter turnover in the se­condary trad­ing be­cause there is al­ways a strict cor­re­la­tion be­tween the pri­mary mar­ket and its abil­ity to fi­nance the is­suers, and the ef­fec­tive­ness of the mar­ket for al­ready listed com­pa­nies. That is why the whole in­te­grated re­form is so im­por­tant.

What are the main fac­tors that af­fected the bourse's devel­op­ment this year? What are your ex­pec­ta­tions for 2016?

2015 has been shaped by many neg­a­tive fac­tors. Against that back­drop even the in­ten­sive quan­ti­ta­tive eas­ing by the Euro­pean Cen­tral Bank did not cause the ex­pected re­sults, in my opin­ion. The rea­sons re­side in high in­sta­bil­ity. Greece, the Ukrainian cri­sis, the sit­u­a­tion in the Mid­dle East, prices on the mar­kets of oil and gas, to name a few. Ul­ti­mately, when some­thing like the crash on the Chi­nese ex­changes hap­pens - it was some­how too much for the eq­uity in­vestors. We will face a pe­riod of in­creased volatil­ity and risk aver­sion on the part of in­vestors. I have no idea how long it may last. Hope­fully it will end soon. For the Ro­ma­nian mar­ket it would be best if we re­turn to more of the op­ti­mism which we ben­e­fited from in 2014, keep­ing how­ever some of the cur­rent higher volatil­ity.

What should BVB do to be in­cluded in the watch­list for the up­grade by MSCI and the FTSE Group?

The main, if not the sole prob­lem, is the num­ber of com­pa­nies that must meet fairly de­mand­ing cri­te­ria im­posed by the MSCI, con­cern­ing the mar­ket cap, the free float value and the daily liq­uid­ity in trad­ing of those com­pa­nies. Prac­ti­cally we can ac­com­plish that only if the pri­vati­sa­tion of the blue chips is re­sumed and, as a nec­es­sary com­ple­ment, if the free float in some of the al­ready listed blue chips is in­creased.

Do you think the Za­greb Stock Ex­change could de­throne BVB as a re­gional leader fol­low­ing the re­cent ac­qui­si­tion of the Ljubl­jana bourse?

I hope that our col­leagues from Za­greb will run very well the merged plat­forms be­cause it will only mo­ti­vate us for new achieve­ments.

Will the launch of the SEE Link, sched­uled for the be­gin­ning of 2016, in­flu­ence the Bucharest bourse in any way?

I think it will be com­pletely neu­tral for the BVB and our mar­kets.

Lud­wik Sobolewski, CEO

The Bucharest Stock Ex­change (BVB), with a mar­ket cap­i­tal­i­sa­tion of some 31.1 bil­lion euro by Au­gust 2015 and an av­er­age daily turnover of nearly 7.7 mil­lion euro, is the big­gest bourse in South­east Europe. Cur­rently clas­si­fied as a fron­tier bourse, it is un­der­go­ing up­grades with the view to re­ceiv­ing an emerg­ing mar­ket sta­tus.

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