The Bucharest Stock Exchange puts its hopes in foreign investors to help it return to its former glory

The management of the Bucharest Stock Exchange has made it a priority to attract foreign investors, as their exodus from the market has had a significant impact.

"Attracting foreign investors is a necessity and a priority for the Bucharest Stock Exchange", Anca Dumitru, general manager of the BSE said yesterday, on the occasion of a conference about the mutual fund industry.

"If we review the capital which outflowed from the Romanian stock exchange these last two years, we can see that it"s not the beginning of the financial crisis but increased risk aversion on an international level which caused the exit of foreign investors. Currently, the modest liquidity of the domestic stock market deters foreigners investors", Anca Dumitru said.

According to data from the BSE for the month of September, domestic investors invested 480.63 million lei, whereas foreigners bought stocks worth 162.58 million lei. However local investors also sold stocks worth 520.37 million lei.

In turn, foreign investors had a positive balance for the sixth month in a row - 47.34 million lei for the month of September - even though they sold stocks worth 115.24 million lei.

• Short list of solutions for increasing BSE turnover

Shortlisting the issues that the domestic stock market is facing, Anca Dumitru mentioned a report of the operator of the London Stock Exchange (FTSE) published at the end of September, which put the Bucharest Stock Exchange in the lowest tier, together with the stock exchanges of Bulgaria, Slovakia, Slovenia, as well as Botswana, Kenya or Vietnam.

"FTSE has found that our capital market does not meet several requirements for a free and developed market, including the absence of short-selling and global accounts", Mrs. Dumitru said. In spite of all these things, she feels that the modest trading volume is the only real issue the BSE is facing, with the others soon to be solved.

"We will have global accounts and short selling soon, meaning the only problem that won"t go away by itself is the far too low turnover of the BSE, which makes it unattractive for foreign investors", the general manager of the BSE said.

Anca Dumitru yesterday proposed several solutions for increasing stock market turnover, but most of them have been around for several years without any visible results.

Mrs. Dumitru said: "A solution would be for the state to privatize companies it owns by listing them on the stock exchange. Another solution would be to list the "Proprietatea" Fund and the Romanian Commercial Bank. Increasing the free-float of state owned companies could be another solution for increasing turnover".

The head of the Bucharest stock exchange said that she has been trying for years to convince the Ministry of Finance to offer a series of financial incentives for companies that go public, without any results.

"We also asked for fiscal exemptions for stock market investors, namely the lifting of taxes for capital gains for several years", Anca Dumitru said.