FROM -12%, TO -3.3% Roller coaster on the Bucharest Stock Exchange

The Bucharest Stock Exchange fell yesterday almost 12%, in less than two hours since the beginning of one of the most spectacular recent trading sessions, to then close with a loss of 3.37%, by creating profit opportunities for the investors who were clever enough to profit from the carousel. Concurrently, the European exchanges were also recording losses of more than 5%, with the one in Bucharest replicating the foreign falls, but to a much greater extent.

Among the hardest hit stocks were those issued by the Financial Investment Companies (SIFs) and by the "Proprietatea Fund" (FP), as the BET-FI index had fallen by as much as 14% by lunch, sparking fears that the worsening drop would cause the trading session to be suspended. The lower fluctuation limit was later extended to 25% for the stocks of SIF "Banat-Crişana" (SIF1), SIF "Oltenia" (SIF5) and "Broker" Cluj (BRK), whereas the price of the Proprietatea Fund (FP) reached a new low since its listing, going below 0.4 lei/share.

The worries over a possible suspension of the trading session were assuaged by Valentin Ionescu, the general manager of the Bucharest Stock Exchange, who urged for calm and who said that such a decision could only be made in exceptional situations, when the drops would be even greater than they were yesterday. The General Manager of the BSE expressed his hope that the drops would abate in the second part of the day, which they did.

The BET-FI index recovered from a drop of 14%, to one of 4.93% closing at 17,508.60 points, whereas the BET-NG index, which tracks the evolution of the energy companies on the BSE, has tempered its fall, from almost 14%, to 2.43%, at the end of the session.

The BET index, of the ten most liquid stocks on the Bucharest Stock Exchange, yesterday fell 1.97%, after it was falling like a rock in the morning, by as much as 11%.

Businesspeople shared with us opinions on how they view yesterday"s trading session, and brokers have presented us with their estimates for the coming period. Hereinafter we recount their statements.

• Ovidiu Tender, businessman: "The capital market has rarely reflected the true value of companies"

Business man Ovidiu Tender, who controls "Prospecţiuni" and "Vulcan", which are both listed on the stock exchange, claims that he isn"t too affected by yesterday"s drops, as he is more interested in the companies" financial results.

In his opinion, the stock market has rarely reflected the true value of a company: "The drops of the companies on the local market aren"t affecting me too much, because I am far more interested in their financial results and almost not at all in financial speculation. I"ve gone through a far more drastic drop than this one, it"s nothing new. The profit of the group amounts to almost two million Euros a month in the first half of the year, so I don"t have any serious reasons to worry.

On the international markets, the situation is far more problematic and it indicates a far longer recession, probably of at least 10 years, with negative implications for Romania as well."

• Cătălin Chelu, investor: "One week from now it will be a much better time to buy"

Businessman Cătălin Chelu, one of the largest investors on the Bucharest Stock Exchange, is betting that the drop of the BSE will continue in the coming days, which will make it a better time to buy. The investor conceded that he has left "stunned" by yesterday"s drop, but he hasn"t sold anything, because it is "stupid" to sell when the stock market "is crashing".

"What would be the point of selling now? When you"re caught on the wrong side like this, it will leave you stunned. I am not buying and I am not selling right now, it is stupid to sell when the stock market is crashing. In fact, I consider that one week from now it will be a much better time to buy. I personally don"t think we will get out of this situation too soon. I think it"s more likely to be bad than to be better", Chelu said.

• Constantin Frăţilă, investor: "I didn"t sell because I didn"t have the courage to"

Investor Constantin Frăţilă, known for his stakes in SIF "Transilvania", COMCM Constanţa and SCUT Constanţa, admits that he was caught wrong-footed by yesterday"s drop, after buying shares one month ago. He said that he didn"t sell yesterday, but that he would try to start buying again, to improve his average price.

Constantin Frăţilă said: "I made a mistake in the purchases I made one month ago, I"m already down 30% on my recent purchases. In my opinion, there is a greater crisis looming than the one of 2008-2009. Stocks will fall, but not at the pace that we saw today (ed. note: yesterday).

Today (ed. note: yesterday) I didn"t sell because I didn"t dare, but I didn"t buy either. I"ve lost money, but I will be buying in slightly, to improve my average price. The stock market is like a disease. You like it, you"ve made money from it and you can"t leave it anymore, no matter what".

• Marius Cristescu, businessman: "The Americans set the trend"

Businessman Marius Cristescu, who, together with his brother, Emil Cristescu, owns several companies listed on the BSE, says that he played the stock market yesterday and made a profit.

He said: "If the foreign stock markets are experiencing corrections, it"s natural that it would happen with us as well. I haven"t frozen my portfolio, we are operating daily just like we did until now. Today (ed. note: yesterday) we bought and sold, we even made a profit. I"ll be watching the stock market in the coming days as well; the trend is set by what is happening on the foreign markets. We will be watching what is happening now at 16:30 when the stock market opens in the United States".

• Rareş Nilaş: "We have come to the second stage of the financial crisis"

Rareş Nilaş, the general manager of BT Securities, considers that we are currently entering the second stage of the financial crisis and that the drops of the BSE are justified.

"We have reached the second stage of the financial crisis, caused by the sovereign debt crisis. Unfortunately, the drops on the Bucharest Stock Exchange are justified by the structure of the market and of its investors. We don"t major local institutional investors, and liquidity is low", said Mr. Nilaş.

The manager of BT Securities stressed that foreign investors are a lot more careful during this period, as there is uncertainty about the evolution of the markets.

"Investor perception is far more cautious during this period ... There have been many talks about the reference price of 0.33 lei/share recommended by the consortium which intermediated the secondary offering of Petrom. It was said at the time that at that price the company was undervalued. Look at the price of a Petrom share on the stock market", said Rareş Nilaş, who was involved in the offering of 9.8% of Petrom, which ended on July 22nd.

• Ovidiu Fer, "Wood & Company": "There are currently no clear signals for long term investments"

Ovidiu Fer, equity analyst at "Wood & Company", considers that, to an extent, panic is the main factor which is causing, outflows from investment funds all over the world.

In his opinion, the current stock market is a market of traders, for the most part, and not of long term investors, because there are currently no clear long term investment signals.

At the same time, the financial results of a company don"t matter that much, in his opinion.

Ovidiu Fer considers that the European stock markets will see a very high volatility, which will last one or two weeks, with intra-day fluctuations ranging between 5 and 10%.

• Florin Cătinaş, "WBS": Most likely the sale decision will have been made by foreign investors

Florin Cătinaş, head of the trading department at "WBS", considers that the decisions to sell were made before the opening of the foreign stock markets, and they have most likely belonged to foreign investors, which are mostly institutional investors.

• Dragoş Dărăbuţ, "Tradeville": A portfolio which includes 50% defensive stocks and 50% cash is a good alternative

Dragoş Dărăbuţ, analyst at "Tradeville" said: "(...) a portfolio which includes 50% defensive stocks (high dividend stocks) and 50% cash (bank deposits)" is in my opinion a good alternative under the current context. He added: "Such a portfolio, with a long term horizon (at least 3-5 years) will allow the investor to be conservative (50% cash) and will allow it to buy shares at lower prices in a few weeks/months if the global economy will once again go into recession". He also considers that speculation is very risky at this time due to the increased volatility in the market.

Dragoş Dărăbuţ also said that the two most important factors which caused yesterday"s massive drop, were the investors" panic and lack of confidence, compounded by the execution of the stop-loss orders on the liquid markets such as the American and the European ones.

Dragoş Dărăbuţ considers that the local indexes have diminished their drops amid the evolution of the foreign markets, but also due to the fact that some of the speculators started buying after the steep drops of the first part of the session.