BNR: Romania"s capital market has a low degree of correlation with the European markets

Izabela Sîrbu

The correlation between the Romanian and the other European capital markets was relatively low, except for the international financial turmoil in the September - October 2008 period, when it increased significantly due to a phenomenon of "contagion", according to data in the Financial Stability Report of the NBR, published on Monday (BNR).

"A drop in the levels of perceived risk for the global financial system caused a decreased correlation, pointing to a weak integration of the domestic capital market with its European peers", NBR data shows.

According to the same report, the high levels of uncertainty on the international financial markets and the domestic economy cause investors to remain cautious, and the low liquidity leads to high volatility.

"Financial turbulences caused by the international crisis also reflected on the derivatives market, whose quotations reflect investor expectations. The spread between spot and futures prices for the financial investment companies fluctuated wildly between September - October 2008, when high uncertainty lowered investor"s ability to predict the evolution of capital markets", according to NBR"s data.

The volatility of stock market indexes increased pointedly in the September - October 2008 period, due to the increased instability of the international financial markets, on the back of a serious risk reassessment on a global level.

"Volatility decreased significantly compared to the peak, but it still remains above the H1 2008 values", the report says.

The assets of open-end investment funds stood at 941 million lei at the end of 2008

The assets of open-end investment funds stood at 941 million lei, similar to numbers at the end of 2007.

The NBR financial stability report says that "the current status of the net assets was partly influenced by the devaluation of the securities portfolio, caused by the downward evolution of stock market prices, and on the other hand by new capital inflows, of approximately 307 million lei".

The structure of aggregated net assets of open-ended funds changed considerably over 2007, with the weight of listed shares in the total net assets dropping from around 45% in Q4 2007 to 12% in Q4 2008.

At the same time, the weight of low risk investments (bonds, treasury certificates and bank deposits) increased significantly in 2008, first and foremost due to investors" growing risk aversion, and on the other hand due to the high interest rates on these instruments.