This years Stock Exchange plunge, a reminder of 1997 – 1998 financial crisis

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The Bucharest Stock Exchange (BVB) is one of the world’s financial institutions that saw the steepest plunge in 2008, in an evolution that reminded investors and analysts of the 1997-1998 period, when the Asian financial crisis also reached Russia and Turkey.
According to data presented on Sept. 4 by BVB representatives, the local bourse main index BET (that tracks the evolution of the top liquid 10 shares) fell 44% in 2008 from 2007, after 9 years of growth.
 
In 1998, under the ripple effect of the Asian and Russian financial crisis, BVB plummeted 50%. Over the interval 1999-2007, BVB had the steepest growth in 2002, up 120% (when the Financial Times also designated it as the best performing Stock Exchange) and in 2004 – with 101%.
The BET-C composite index fell 38% in 2008 after 6 years of successive growth (by 127% in 2002 and 104% in 2004), and the BET-FI, which mirrors the evolution of the five financial investment societies SIFs plunged 56% after a seven-year growth streak (175% in 2005).
 
“We’ve been through a financial storm in 1997-1998. At that time, BVB was far more vulnerable. We shouldn’t depict the current situation as abnormal. Quotation growth is neither linear, nor permanent. We were given a lesson in 1997, and are given another one in 2008. We have been witnessing a paradox – in a growing economy, with companies posting robust and rising financial results, shares are falling,” said BVB president and director general Stere Farmache.
 
He added that although Romania’s economic growth hit a record high and despite the budget deficit keeping within 2.3% of the GDP, the central bank’s forex reserves having increased and the GDP share of the current account deficit having narrowed, other indicators have affected the local stock exchange market.
The 9.04% inflation peak (July 2008/July 2007) and BNR’s key interest rate of 10.25% have impacted the exchange, said Farmache.
He recommended investors to ‘take more seriously’ the analysis of BVB listed companies.
 
Unhappy with the regulations of the Supervisory Commission that requires pension funds to direct their resources to instruments other than the bourse market, the BVB official made this recommendation to pension funds too. According to the indicators posted by BVB, in the first half of the year, non-financial companies listed on the Stock Exchange had an aggregate turnover of 20.914 bln lei, up 45% from mid- 2007, 23.978 bln lei in total revenues – up 51% from the year before, and a net profit of 2.454 bln lei (plus 60%.)
Listed financial companies also had a significant performance – 946 million lei in net profits (plus 16%) and total revenues of 9.373 bln lei (plus 71%).
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