THE BSE MARKET RISING (LAST YEAR), BUT... It is interest in foreign markets that increased among Romanian investors

The appetite of investors or traders in Romania for foreign markets exploded last year, which was reflected by the activity of brokerage firms which offer instruments to access the international markets (both via holding assets or via CFDs), which have seen records in the new number of customers, open accounts or trades conducted in 2020.

Is a phenomenon that is manifested as a result of a combination of factors, including the strong volatility caused by the Covid-19 shock, the trend of accelerated digitalization caused by the pandemic, the strong decrease or even the removal of trading fees and the much richer supply of instruments, according to information gathered by BURSA newspaper from several intermediaries.

• TradeVille - 41% of the accounts newly opened accounts in 2020 were meant for trading on the foreign markets

At Tradeville, the total number of trading accounts has doubled last year, to nearly 18,000, the representatives of the brokerage firm have told us.

"Of these, about 36% are intended for trading on major international exchanges. The number of new accounts opened for trading on foreign stock markets amounted to 41% of the total new accounts opened in 2020", the team of the brokerage firm said.

Throughout last year, TradeVille executed over 630,000 trades on the BSE and foreign markets. Of those, approximately 11% have been made on the foreign markets, and over 100,000 trades were made directly via mobile, TradeVille told us.

The cheaper stock market prices in summer of last year represent a factor that underlie the described dynamic, but the critical difference came from how easy it was to invest from any screen, the team of the brokerage firm said.

"The creation of a stock portfolio with us is done 100% online, the confirmation of the account opening is done the next working day, transfers are fast, and the trading fees on foreign exchanges have been reduced", TradeVille stated.

• During the state of emergency, TradeVille opened three times more accounts over the similar period of 2019

According to the brokerage company, the interest in trading on the foreign stock markets has increased at an accelerated pace since back in the beginning of 2020.

"The investments we made in online and mobile trading technologies even before the Covid-19 pandemic helped us a lot. We also quickly and efficiently adapted our operations to the new circumstances, including during the spring emergency. In fact, between March 16 and May 15, 2020, TradeVille opened three times more trading accounts than in the same period in 2019," the brokerage house team told us.

It is the context in which, in 2020, the proportion of transactions made through TradeVille on foreign markets increased substantially compared to those made with securities listed on the Bucharest Stock Exchange, according to the information provided to us by the brokerage company.

"We mention, however, that the volume of securities trades also increased, given that both corporate and Romanian government bond issues enjoyed a very good interest from investors", TradeVille officials added.

• eToro had an increase of 228% in the number of Romanian customers in the first nine months of 2020, compared to the same period of 2019

For eToro, 2020 was a year of massive growth, as the company added over five million new users of the platform globally, while the turnover in stocks increased 400% over the previous year, the representatives of eToro told us.

"We then continued to see steady growth, and at the end of January we exceeded one million new registered users globally, reaching over 18 million registered users. Romanians represent approximately 1.5% of eToro's global customer base", added the company's representatives, emphasizing that the information presented was valid on February 15.

In their opinion, that evolution is based on a confluence of circumstances : the acceleration of digital technologies, no-fee investing, interest rate cuts and similar trends.

"They stimulate the participation of individual investors in the capital markets, which now account for 25% of trading volumes on peak days. 2020 saw an increase in those investing in equities, while the Covid pandemic induced market volatility. Many of our new users have started to interact with the financial markets during the lockdowns. They are investing mainly in the stocks of the brands they recognize from their daily use," eToro told us.

The company has been offering commission-free trading in fractional shares to its clients in Great Britain and Europe since May 2019, eToro also told us.

"Unlike other vendors, eToro does not operate a freemium / premium model, so there is no limit and you don't have to suddenly buy a subscription or pay more to invest in more shares without commissions," the representatives of the company added.

From their point of view, the growth of the individual investor segment is a trend that will not disappear soon, given that we have seen a rapid growth of digital in all aspects of our lives during the pandemic (see Notes).

"Our lives have moved online and the interest in online investing and platforms such as eToro has increased in this period. Data shows that Romanians are more and more interested in accessing the international markets: eToro saw a 228% increase in the number of Romanians trading on its platform in the first nine months of 2020, compared to the similar period of 2019", the company's representatives told us.

• XTB România - three times more customers and three times higher turnover compared to 2019

XTB România saw a record last year, as in 2020 it had three times more new customers and three times higher volumes compared to 2019 (205% increase in the number of new customers and 209% turnover increase), the company said in a statement made about ten days ago.

According to XTB, its optimized offer combined with historical events that moved the market in 2020 have attracted almost four times more funds compared to 2019, representing a 280% increase in customer deposits.

Irina Cristescu, General XTB Manager Romania, told BURSA the following in an interview she gave in November last year: "2020 was a historical and atypical year of many points of view. Extraordinary events that took place in the beginning of the year generated an unprecedented volatility in the financial markets, volatility that translated into unprecedented volumes from market participants and attracting a new wave of investors among those who have so far not to take into account scholarship trading. "

After the developments of 2020, XTB had locally, in January 2021 alone, almost as many new customers as it had 2019 as well, and double compared to the last all-time high that was recorded last year at the peak of the pandemic and which was already an unprecedented leap, according to the XTB report of February 8.

"Although we could hardly imagine that the year 2021 could bring a higher volatility than the one caused by the beginning of the pandemic, so that we can easily approach the records of 2020, January came with a huge surprise: the impetuous evolution of the cryptocurrencies and the GameStop phenomenon. Those, together with our offer (0% fees on stock trades for turnover below 100,000 Euros), have attracted an unprecedented wave of new investors, so the Romanian branch has reached a new all-time record", said Irina Cristescu.

• Admiral Markets - its business in Romania doubled last year

Admiral Markets UK, an entity registered in the UK, saw a doubling of its activity in Romania last year compared to 2019, its representatives told us.

On average, 64 new CFD accounts a month were opened last year with Admiral by Romanian. New deposits amounted to about 630,000 Euros per month. In the first month of this year, the activity of the online trading service provider was even higher than last year's average, as Romanians opened 120 new CFD accounts, and new deposits reached about 700,000 euros", the Admiral team said.

It bears mentioning that starting this year, in Romania operates Admiral Markets Cyprus (an entity authorized directly in Romania). Admiral is currently in the process of reauthorizing a branch of AM Cyprus after the local entity of AM UK was closed in the beginning of the year following Brexit, Admiral representatives told us.

Andrei Iacomi

Notes:

According to Etoro, a research on digitization made for the company in nine European countries by the Centre for Economics and Business Research (CEBR) has shown that the Covid-19 pandemic has accelerated the digital transformation across Europe. More than a third (36%) of the survey respondents reported that they have used digital technologies more heavily outside their job.

Romania seems to have the greatest potential for digital growth; According to the survey, Romanians are among the most enthusiastic Europeans when it comes to openness to new technologies. That also applies in finance, a sector where 74% of Romanians agree with an increase in digitization, Etoro told us.

According to another study conducted by the company in Romania in November 2020, in partnership with IPSOS, the main reason why people do not invest seems to be the lack of money and of the necessary knowledge, especially for those in the younger generations.

Most of those investing do predominantly in bank deposits (54%), and 80% of respondents said they prefer to learn online about investments, the reason being the speed and simplicity of using the platforms. The study data also shows that Romanians are keen to be able to manage their own portfolios, but 34% are of the opinion that online investment platforms are too risky for beginners, Etoro says.

"For many, the idea of investing on an online platform seems a very difficult thing to do. In fact, the most important thing is for everyone that is documented on the platform to trade and about the things in which to invest in", the company's representatives added.

Contracts for Difference (CFDs) are derivative financial instruments with various assets underlying assets (stocks, indices, ETFs, cryptocurrencies), which allow trading the difference in the price of the asset between the opening and closure of the contract. CFDs essentially offer the possibility of speculating on the price of specific assets without owning them. They are leveraged products and allow the opening of long positions (where one bets on the price rising) or short (where one bets on the price dropping), but unlike futures contracts, they do not have a fixed maturity.

They are complex tools and have a high risk of losing money quickly because of leverage. For example, at Admiral Markets, 71% of retail investors lose money when tradeing CFDs, at XTB the proportion is 77%, and at eToro 67%, according to the warnings on the companies' websites.