Romanian exchange capital, the hardest blown by international crisis

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The most important 25 companies running on mostly Romanian capital traded on the Bucharest Stock Exchange (BVB) have so far this year lost 2.5 billion euros of their capitalization, which means 57% of their market share of late 2007.
Local entrepreneurs are arguing that the decline of the companies traded on the stock exchange is the result of a bad context in the capital markets and panic among local investors over corporate financial and operational states.
 
“Everybody is criticizing the local companies for the decline on the stock exchange, but I believe these are formal losses that have nothing to do with business, which has strengthened. I believe the ones that have left are the profiteers, and the sound position of any company is given by long-term investors, which will come back to the market. Romanian companies are growing and consolidating their business, and I am convinced that in at most one year the Bourse will bounce back to its good 2007 levels,” Chairman of Banca Carpatica tells daily Ziarul financiar.
 
He says this is not a time for selling, but a time for buying. Lately, he has bought many stakes in Carpatica on the BVB, but their value has decreased by some 54% since the beginning of the year.
Chairman of Impact Dan Ioan Popp argues that decline in the Bourse is currently not affecting the local companies, which he adds have secured capital for themselves on time.
 
“The developments in the Bourse are important when you want to use this instrument to draw resources from the capital market,” says Popp, adding that he believes the BVB has reached trade volumes specific of an underdeveloped market and that there are not enough instruments the companies may use to operate. Impact saw its capitalization slashed by 220 million euros in the year so far, from 277 million euros to 57 million euros.
 
Leading the top in the case of the companies traded on the BVB in terms of decline are companies controlled by local investors, including Broker Cluj (BRK) financial broker, which capitalisation has plummeted 85%; the Impact Bucharest (IMP) property developer, with an 80% fall in market value, and aeronautics component manufacturer Turbomecanica Bucharest (TBM), with the 75% plummeting.
Among the banks running on Romanian capital, Banca Transilvania (TLV) and Banca Carpatica (BCC) reported larger declines than BRD-SocGen and Erste Bank.
 
Banca Transilvania, founded and headed by businessman Horia Ciorcila, witnessed on Thursday one of the largest downfalls, of more than 5%, with its capitalisation slashed down from more than 1.5 billion euros in late 2007, to 743 million euros. Its profit advanced 40% in the first half-year 2008, the largest of all banks traded on the BVB.
In the case of pharmaceuticals companies, Biofarm of Bucharest (BIO), running fully on local capital, lost 62% of its value, more than Antibiotice Iasi (ATB) and Zentiva Bucharest (SCD).
 
Not so far ago, the companies controlled by local entrepreneurs used to be the most active on the Burse, making full use of the available financial instruments. Thus, they raised money there and offered stockholders free shares instead of dividends in an attempt to keep profits within the company. Analysts say this seem to backlash against the companies on local capital: there are too many shares and local investors on the exchange, which combined exerts stronger pressure on sale, compared with the companies controlled by strategic foreign investors.
 
Among the companies having seriously bled capital are Prospectiuni Bucharest (PRSN) land surveyor, which capital depleted by 217 million euros; the Comnord Bucharest (COSC) construction company, with a 131-million-euro depletion and the Dafora oil drilling company of Medias (DAFR), which decline reached 77 million euros.
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