THE REPORT OF THE BSE ON THE FIRST SEMESTER Triumphant, with or without accomplishments

The Bucharest Stock Exchange has yesterday published its financial results, which it presented in a triumphalist manner, in the report for the first semester of 2014. Nicolae Gherguş, general manager of Confident Invest and vice-president of the Association of Brokers, says: "As long as the management does not consider the revenues from the Electrica IPO as exceptional, the Stock Exchange can pride itself on a solid increase of its financial ratios. This may sound good to the general public, but the shareholders of the BSE, most of them knowledgeable when it comes to the stock market, are extremely displeased with the extremely high and inefficient expenses".

The managing director of Confident Invest considers that a realistic analysis of the activity of the management of the BSE should exclude the IPO of Electrica and comment on the routine operating results, because these < presents > from the state are rare and unpredictable.

"My concern, as a shareholder, is that, if the BSE has achieved 57% of its revenues budgeted for 2014, at the current turnover level, the second semester will be difficult, given that operating expenses will remain the same", says Nicolae Gherguş, who added: "Even if the quarterly report mentions that < ...the rate of increase of operating expenses is lower than that of operating revenues... >, it is easy to deduce that the increase is offset by the earnings from the IPO, and could not be justified once the latter is disregarded. I hope that I just wasn't paying attention, but I have yet to see the effects of the < ...campaign to improve the perception of the local market....marketing and promotion...the events and the educational campaigns... >.

Sure that these activities are necessary, but the money needs to be spent in good faith, and those campaigns need to be conducted professionally and efficiently", Gherguş further said.

The manager of Confident Invest explains: "Without liquidity generated by Romanian investors, the Romanian stock market will continue to remain sick. The final holdings of the state will be sold off, and the foreign investors who bought them will trade them where they deem it better.

The BSE will only be attractive to foreigners, if it can provide them with liquidity, and that can only be achieved by advertising the Bucharest Stock Exchange locally, to convince the Romanians to get their money out of banks, and no better time could be found for that than now, when the interest rates are low.

The liquidity of a market means its ability to absorb a significant order, within a certain time period; as a result, when calculating liquidity IPOs, SPOs and < deal > trades (which in reality should be considered as trades outside the regulated market) should not be taken into consideration. It's mostly these elements - liquidity and transactions on the < regular > market - are the ones which I would expect a report on from the management of the BSE, as well as on the effective measures it is considering".

MAKE, the president of the BURSA press group, thinks that three factors are important for a stock exchange: its ability to facilitate the entry and exit of investors, to direct the capital towards the companies that deserve it, to supply credible figures, which are relevant for the evolution of the national economy, and thus lay the foundation for the economic policies of the government and of companies.

MAKE notes that had the BSE created facilities for the entry and exit of investors, then that would have been visible in the number of market participants. Or, he, says, the number of accounts has increased (but not enough to create "critical mass") following a one-off operation, namely the privatization of Electrica, and not as a result of organic development.

From that, MAKE draws the conclusion that the BSE has not become more functional on the individual investor segment.

In the first semester, the BSE has not conducted any IPOs, has not directed any capital, it has merely sold Electrica, a state owned company; from that, MAKE draws the conclusion that the BSE has not become any more functional on the microeconomic segment either well.

The president of the BURSA press group says: "The privatization of this company has created capitalization. It is the initiative of the government and the BSE needs to be praised for having provided a service. But did the BSE have any merit for the decision of the privatization? Did the management of the Bucharest Stock Exchange play a part in the privatization of Electrica, or was this success merely the result of the program that the authorities agreed on with the IMF and thus made under the pressure of that agreement?!".

MAKE asks a question and answers it himself: "Does the BSE provide numbers that are relevant to the national economy? The answer is simple and needs no arguments: No! It never did!" From this, we can infer that the functionality of the BSE hasn't improved on the macroeconomic segment either.

The fact that the government is not capable of drawing up economic policies makes the inability of the BSE to provide credible numbers go unnoticed, he added.