English
The technocratic government led by Dacian Cioloş proposes the listing of 20-25% stakes in Hidroelectrica and CEC Bank, among the measures meant to help the development of the Romanian stock market, included in the final strategic document called "Competitive Romania", which was the result of the debates initiated by the Executive, in July.
At the time, "BURSA" noted the superficiality of the brochure put up for debate by PM Dacian Cioloş, which was however endorsed by president Klaus Iohannis, by NBR governor Mugur Isărescu and by the chairman of the Romanian Academy.
At the time, the strategy was lacking substance, and was replete with truisms like "essential", "significant", "necessary" or "major potential".
The debates on the document were scheduled to end around September 15th, and yet, the government has only completed that "strategy", now, with the parliamentary elections looming, which suggests that headline article published by BURSA, in July, - "Country project or electoral campaign?"- seems to have been spot on, especially since the technocratic politician Dacian Cioloş has been endorsed by PNL and USR, even though he has continued to pretend he is apolitical.
In July, we noted that the government had not made any plan and did not have any clear goals, other than the need "to bring Romania up to its true potential for growth".
This time, the government has structured its brochure into objectives and steps to take and has also proposed a budget for the objectives that have to be achieved by 2020.
For the capital market, the government is proposing a budget of 704 million Euros to the growth of private pensions by 2020, because the other objectives do not require funding from the state budget.
It would appear the government is embracing the goal of the stock market community of moving up to the emerging market status, following the evaluations made by ratings firms.
Thus, one of the measures proposed is the acceleration of the listing of new companies through the stock exchange, including: "Hidroelectrica (the listing of a block of shares of at least 20 - 25% in order to create a strong secondary market that would ensure sufficient liquidity for shares on the stock exchange; free float of at least USD 635 million for Hidroelectrica to be eligible for the MSCI); CEC Bank - new stock issue sold in an IPO, of at least 20 - 25%, in order to raise funding for expansion, regain market share, support the economy; Telekom Romania Communications - the sale of a 25% block of the shares owned by the state; CN Aeroporturi Bucureşti - share capital increase through the issuing of new shares representing 20-25% of the share capital of the company and their sale through the BSE; CN APM Constanţa - share capital increase by issuing new shares representing 20-25% of the company's share capital and their sale through the BSE; The national Salt company".
The strategy also proposes the speedup of the secondary IPOs of already listed companies: "Romgaz - the sale of a stake of at least 3.4% in order to meet the MSCI free float requirements (currently at 22%/ USD 545 million); OMV Petrom - the sale of at least 7.1% in order to meet the MSCI free float requirements (currently at 9% / USD 345 million); Rompetrol - the sale of a stake of 26.6959% of the shares owned by the state".
The entire budget allocated by the government in order to meet the objectives relating to the stock market until 2020, which amounts to 704 million Euros, is aimed at supporting private pensions - Pillar II and III.
The government seeks the expansion of the private pensions system fund by broadening the investment horizon, which would allow funds to participate in the financing and development of infrastructure projects, private equity and real estate.
The strategy stipulates the preservation of the schedule for the implementation of the pension reform and increasing contributions to Pillar to 6% of the gross wage, as well as preserving the deductibility of Pillar III contributions.
The government also wants the creation of a single entity under its control which would concentrate and manage in one place the management of all of the government's interests.
Another goal is the streamlining of the tax registration procedure for foreign investors that are interested in trading on the Romanian stock market, and the steps for achieving that goal are: "developing the necessary infrastructure at the National Tax Administration (ANAF) and of the regulatory framework pertaining to non-resident investors; the implementation of the plan of the ASF to remove the holding limits in the SIFs, due to the amendment of the existing legislation and the clarification of the status of investment funds, by May 2016 at the latest, the implementation of the STEAM project by the ASF in order to improve regulations and legislation".
This is where the government has overlooked an inadvertence, because the holding limit in the SIFs has not yet been lifted even though May 2016 has come and gone, or at the very least we have a case of unfortunate wording. Perhaps they meant to say Mai 2017, which comes after April, when general shareholder meetings are traditionally scheduled, and those of 2017 will hold elections for new executives.
It must be mentioned that May 2016 was the deadline for the managers of the SIFs to get authorized or to register as managers of alternative investment funds (AFIA), in order to comply with the provisions of the law 74/2015 concerning managers of alternative investment funds, which was passed in May 2015.
Another objective is supporting the domestic capital market in order to help the development of domestic capital, through measures that align the national corporate and stock regulatory framework to the European legislation in effect, as well as the national correlation of the primary and secondary legislation, the updating of Law 31/1990, in order to improve corporate governance, increase the number of available instruments, the issuing of corporate bonds, etc., the creation of financial and management educational program for privately owned domestic companies, especially in areas such as corporate finance, project management, product management and corporate governance.
The government wants to create the regulatory framework which will allow the elimination of Section 1 of the Central Depository (ed. note: which holds the records of all the owners of vouchers from the mass privatization program) and increasing the retail investor base.
The government states that meeting these objectives is the responsibility of the BSE, the ASF and of the ministries which control state owned companies, which are in charge of implementing Ordinance 109 concerning private management,.
The government notes that the Romanian stock market is currently in an incipient development stage (low capitalization and liquidity - being currently considered a "frontier market"), and that it provides an insignificant portion of the financing needs of domestic companies. The government's representatives think that, by growing the domestic stock market, Romania has the unique opportunity of having a sector of the financial market aimed at domestic companies, while also providing balanced access to foreign and local funds, being regulated and operationally managed by Romanian institutions.
"The classification of the local market as an emerging market by the global index providers (FTSE, MSCI, S&P Dow Jones Indices, Stoxx) would be a natural step towards expanding its role of boosting the national economy, as well as towards increasing the flow of foreign investments in Romania", the government states.
This autumn, the FTSE Russel agency has placed the Romanian stock market on the watchlist for the promotion to the emerging market status, and announced that the only criterion that the market still needs to meet is that of liquidity.
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