The Bucharest Stock Exchange is on the brink of demise after feeding off illusions - instead of professional investors, the BSE has relied on local clientele; mainly speculators that pursue rapid profit and expect the market to advance day by day, which cannot perpetuate, says Patrick Gelin, the chairman of BRD-SocGen, the second-largest bank on the market in terms of assets.
"No financial market is created that way. It was the non-residents, who are now gone, that made the market and the increase is over because local speculators cannot support it, so everybody is backing out. The market can only live with local professional investors - insurance companies, pension funds, it cannot rely on non-residents and even less on retail clients. Institutional investors create the market, but they have something to invest their money in. You cannot build a market from four or five liquid shares, you need more than ten to do that," BRD's top man says.
The banker does not see how the stock market can rebound given that non-residents specialising in financial transactions are no longer coming to the market.
"The Bucharest Stock Exchange needs to reflect on what can be done, to look at the excessively high listing costs and at simplifying the bureaucratic procedures to encourage new issuers."
As an example, he provided the bank's strategy to internalise its subsidiary BRD Securities, which has dragged on for months.
"It has become a nightmare because of the bureaucratic problems at CNVM (National Securities Commission) and at the Stock Exchange."
The BET index yesterday bounced back by almost 4%, after the Stock Exchange lost almost 10% of its capitalisation on Tuesday and Wednesday. The highest increase yesterday was that of Erste Bank, 9%, the majority shareholder of BCR, while BRD's shares rose by over 4.5%.
As for the new wave of turm
