Romanian companies are still weary of using the stock market as a financing source and are heading almost exclusively towards banks, with quite an opposite trend emerging in the European Union countries, where the role of the traditional banks is diminishing.

The capitalisation of the Bucharest Stock Exchange (BSE) has recently exceeded the $4 billion limit, in addition to another $2.5 billion, namely RASDAQ's capitalisation. However, last year's growth of the BSE capitalisation was exclusively prompted by the increasing quotes and not by the arrival of new companies, as it happened in 1999 and 2001.

2003 was the first of the last five years when BSE's total capitalisation was outpaced by non-government lending. The value of the shares that can be traded at BSE went up 17% in real terms last year, whereas non-government lending surged 41% in the same period, according to research released at the end of last week by BSE director Stere Farmache.

"Despite increasing demand from investors, Romanian companies are still displaying certain reservations when it comes to getting financing by using the stock market mechanisms," Stere Farmache stated. BSE capitalisation accounted for 7% of the Gross Domestic Product (GDP) last year, whereas the value of non-government lending accounted for 16% of GDP. One of the causes behind the capital market's slow growth is the shrinking strength of Romanian institutional investors. The assets invested on the stock market by the mutual funds are extremely small, whereas the reform in the pension system has hardly begun.

Besides, the low level of loans granted through the stock market characterises the Central and Eastern European countries, claims Pavel Hollman, secretary general of the Prague Stock Exchange. vlad.nicolaescu@zf.ro

Romanian companies are sti