English
• Article published in "BURSA", January 30th, 2004
"Almost a decade after the inauguration of the Bucharest Stock Exchange, there are no doubts that our implementation of the stock market is nothing more than "a thin broth made from a ghostly, starving turtle dove" (to paraphrase Mark Twain), -in other words, a terrible failure.
The average daily turnover on the Bucharest Stock Exchange and the Rasdaq has stabilized at a very modest level, the equivalent of one million Euros, which means the stock exchange is far from being relevant in relation to the country"s GDP. Just for comparison"s sake, the stock exchange of Prague has a daily turnover of about 32 million Euros a day, and the one in Budapest has a daily turnover of 37million (which, compared to the size of their economies, is still not such a satisfactory achievement). What is even more obvious though, is the fact that the stock market did not influence our life as a nation.
It has not engendered any passion among the country"s citizens, it hasn"t helped the plants and manufacturers, it was not considered when the economic strategies were developed. Even the privatization process went through without using it. At best, the stock exchange has helped concentrate the ownership of the country"s fortune, but that phenomenon would have happened anyway. Most people aren"t interested in the growth of Romania"s stock market; our experts aren"t overly concerned about this issue, they are happy just fighting like sparrows over whatever breadcrumbs they can grab. Between 1990 (when the Bucharest Stock Exchange was mentioned for the first time in a government ordinance) and the present day, there was only one recent debate concerning the strategy of the stock market. Last year, the joint teams of the Bucharest Stock Exchange and of the Rasdaq have drafted a document intended to increase the daily turnover fifteen to twenty times. The strategy listed thirteen other objectives (transparency, oversight, corporate governance etc), which were intended to help achieve the main goal, and said that the document would be a first step towards building "the biggest stock market in the region". The strategy was presented last summer, in a meeting held in the Balvanyos resort, but, oddly enough, it received a rather lukewarm welcome from the market"s experts, and the lack of results in the six months that have elapsed since then illustrate that state of mind.
At the time, "BURSA" hailed the drafting of that strategy, since, regardless of its quality, it clearly fulfills a need, even if it is perfectible.
Unfortunately, in the years after the revolution, this initiative had no follow-up and it wasn"t followed by any debate whatsoever. The merger between the Rasdaq market and the Bucharest Stock Exchange, that specialists had great hope for, hit legislative hurdles, (by law, the Stock Exchange is not a joint stock company and therefore can not merge with the Rasdaq), meaning the merger process was slowed down considerably. And since this change of the "design" of the stock market is taking its time in happening, the initial enthusiasm of the government officials seems to have fizzled, as they seem to have settled for their inherited mediocrity.
From a certain point of view, the dallying of the merger is extremely harmful. It leaves the impression that the relaunch of the stock market depends on whether the Parliament will magnanimously accept to carry out the necessary legal formalities. The big (unpleasant) surprise will come after the merger of the two markets gets through, once it becomes obvious it hasn"t helped much. It"s true, the merger would help eliminate the issues of the Rasdaq, caused by the forced listing of thousands of companies as part of the mass privatization process, which is something that the management of the stock market never acknowledged would happen. Naturally, increasing the transparency of the market is beneficial, just like having the listed companies assimilate the principles of corporate governance can only be beneficial.
The problem is that none of these measures will help the market recover, it will just help it improve, while it will still remain at the same level, and the delay of the merger is harmful, because it simply postpones the moment when this truth will become obvious. For all these years, the market"s experts have always put their hopes in elusive targets. First they struggled to get banks listed, then the SIFs, followed by Petrom, followed later by bonds...
Now, the exchange has a little bit of everything.
And what good does it all do?
The merger, the transparency, the corporate governance, the oversight and the other strategic objectives are truly very useful and necessary, but they will not provide the boost that the country needs. Because they are just conditions to be met, but not the true target of the market"s weakness.
In fact, the market is weak because it was badly designed. The Romanian capital market is a textbook example of overregulation. The idea of "skipping stages", the belief in implementing an institution specific to developed economies in Romania"s underdeveloped and disorganized economy like the one that Romania has, is a stupid mistake, and one that is commonly made. We have been the prisoners of this mistake, for more than eight years, and our stupidity is even twice as big, since we are too proud to admit it.
Even though it is obvious that Romania"s citizens, who own millions of shares and have billions of dollars in savings, are the only ones who can support the stock market, we did everything we could to drive them away from the market. We have dematerialized their stock (which could be considered as depriving them of their ownership), we have forced intermediaries upon them (some of them incompetent, others lacking morality and some of them being outright thieves), we have forced upon them fees completely out of proportion with the current or potential gains, and a mountain of red tape; there is a huge discrepancy between the number of stock owners and the number of branches that brokerage firms have; we"ve forced the market to operate on a fixed work schedule - Monday to Friday, between such and such hours; we"ve made stock inheritance uncertain and levied huge inheritance fees.
Let us reread this hastily written list, which most certainly doesn"t include many other hurdles raised before those who want to participate in the market... What could we expect, then?! That the population would participate en masse in the stock market?! Obviously not. Can we expect it to be disgusted at the market? Obviously yes. The people are disgusted with the market, they are not interested in it, and they ignore it. This is the attitude that the market has induced into our people. When you stubbornly and maliciously drive away your biggest customer, your biggest supporter... isn"t it ridiculous and stupid to complain that you"re doing badly?! "
Is there anything of what was said six years ago that isn"t still valid today?
Yes, in the meantime the merger with the Rasdaq did happen and nothing changed, in fact the Rasdaq still hasn"t been cleaned up. And other issues have arisen as well, which at the time nobody could have even foreseen ...
In spite of all this, I honestly have the following to say to the Bucharest Stock Exchange: "I love you just as much as on the first day!"
Euro
Dolar SUA
Franc elveţian
Liră sterlină
Gram de aur
