What analysts are expecting from the Proprietatea Fund

• What benefits could the listing of he Fund have

DRAGOŞ DĂRĂBUŢ, analyst with brokerage firm "Tradeville", considers that the listing of the Proprietatea Fund will cause liquidity to increase, depending on how successful the Fund will be in attracting foreign investors in its shareholder structure. In his opinion, the road-show for this purpose will be the first major trial for the manager of the Fund, Franklin Templeton.

Dărăbuţ said: "I expect that the listing of the Fund will increase turnover on the BSE, since this is a new issuer which has been long awaited both by speculators and by those who received shares in the Fund as compensation.

According to estimates by the officials of Franklin Templeton and of the Central Depository, the average daily turnover for the shares of the Proprietatea Fund on the OTC market was about 5 million Euros last year, similar to the average daily turnover of the BSE in 2010. While estimates may be optimistic and volume may not reach such levels on the regulated market, the listing of the Proprietatea Fund should increase the average daily liquidity.

The increase in liquidity will also depend on getting foreign investment funds to become shareholders of the Fund. The road-show for foreign fund managers, that Franklin Templeton will organize this month, will be a first test for Franklin Templeton.

For the market, the stake of the listing is attracting foreign investors, which will depend on the ability of Franklin Templeton to present the Fund in an attractive light. The market is hoping that non-resident investors will also focus on other shares, thus leading to an increase in liquidity for other issuers".

ANDREI RĂDULESCU, analyst with "Target Capital", considers that the listing will be the equivalent of a revolution on the Stock Exchange and will lead to increased competition in the market: "The long awaited listing of the Proprietatea Fund on the domestic capital market could be seen as a milestone event, perhaps even revolutionary, especially given the context of the past few quarters, which was marked by a very low liquidity. Furthermore, given the current structure of its portfolio, the Proprietatea Fund will become a barometer of the economy (in other words, the evolution of the price of its stock will serve as a more advanced economic indicator", said the analyst of "Target Capital", who added: "Some of the five financial companies may become less interesting for investors and may be forced to resort to more active management of their assets and to improve their profitability to become interesting again. So, the increased competition is a good thing".

MIHAI ALEXA, analyst with "Broker" Cluj, considers that the listing of the Fund could lead to increased visibility of the domestic capital market in the world and as a result could encourage the listing of the companies in which the Proprietatea Fund is a shareholder.

"In our opinion, the listing of the Proprietatea Fund on the stock exchange marks the beginning of a new stage in the development of the domestic capital market and one of the most important events in the history of the Romanian stock market", said Mihai Alexa, an analyst of "Broker" Cluj, who added: "The event could become a real catalyst for the revigoration of the domestic market and one that would help increase the visibility of the Romanian stock market outside the country"s borders. Also, the listing of the Proprietatea Fund on the stock exchange could change the negative image which the stock market has been burdened with for the past two years, as the Fund may quickly become a milestone for the local market and could play a special part in the privatization of the companies in its portfolio by having them listed on the stock exchange".

RODICA ALBU, of brokerage firm "Romcapital", considers that brokers and investors will benefit from the listing of the Fund and that the only ones who have anything to lose are those who did not wait for the listing of the Fund. Mrs. said: "For the market and for investors, the benefits from the listing of the Fund outweigh the drawbacks. I think that the market will benefit from the increased liquidity, as will investors. Brokerage firms and brokers will benefit from larger commissions. The former asset owners who haven"t yet sold the shares of the Proprietatea Fund that they received will be able to sell them far easier and with lower fees. The only ones who will be at a disadvantage are those who sold their compensation briefs before their evaluation or those who sold the shares in the Fund at the end of 2008 or in the beginning of 2009".

ADRIAN SIMIONESCU, the chairman, managing director of brokerage firm "Vienna Investment Trust" and one of most experienced brokers in the market, considers that the listing of the Fund is the most important one in the history of the Romanian market, not only because of the Fund"s interests in various companies, the size of its assets and the purpose for which it was created, but particularly due to the high free-float and to the fact that it is managed by Franklin Templeton.

"It is for the first time when we will have on the market a fund managed by a company with an undeniable reputation", says Simionescu, who adds: "This is where the increased interest of major foreign investors (funds and investment banks) which so far were present on the Romanian stock market and the great expectations of domestic investors".

The head of "Vienna Investment Trust" expects the listing of the Fund to attract more interest from investors than other stocks present on the market: "Besides, since mid-December, a stronger investor presence has become visible", said Simionescu, who added: "The listing could become a catalyst for renewed interest in the capital investments in Romania.

At the same time, it"s only now that the Fund carries fulfills its role, allowing the former owners to collect the compensation they received in exchange for the assets which were abusively taken from them, by getting a fair and transparent pricing for their shares".

DANIELA ROPOTĂ, analyst with "Intercapital Invest", considers that the listing ot the Fund will have a positive effect on the institution, by increasing its visibility: "The listing of the Proprietatea Fund will attract the interest of some majors investor on a national and international level, as well as of the genera public. The increase of the market capitalization can improve the image of the BSE as an institution, as it now accounts for less than 0.02% of the global capitalization and less than 12% of the GDP, some of the lowest in Europe".

• The benefits /drawbacks that the listing of the Fund will have for investors

ANDREI RĂDULESCU, analyst with "Target Capital" expects the listing of the Fund to bring more transparency for the owners of its shares, or for those that will receive its stock as part of the reparations process. "The shareholders of the Fund will have a price set by the market for their holdings, which will be an advantage in particular for those who are not familiar with the capital market", said Rădulescu.

MIHAI ALEXA, analyst with "Broker" Cluj, considers that the listing of the Fund represents an advantage for investors interested in the domestic energy sector. Mihai Alexa said: "For investors, the main benefits of the listing of the Fund would be liquidity and the opportunity to gain exposure to the Romanian energy segment. Investors that have not yet received their shares in the Fund will have a certain advantage over those who have, as they will receive more shares if the price falls below the face value of the stock".

DANIELA ROPOTĂ, of "Intercapital Invest", considers that the listing of the Fund will give former owners the possibility of getting better prices for their shares:

"The increased transparency and investor interest can allow former owners to get better prices for their shares. There would be a lesser number of drawbacks, such as the legislative risk and the amplitude of any negative impact in unfavorable market conditions, but only in terms of the number of investors, and not of volatility".

DRAGOŞ DĂRĂBUŢ, of "Tradeville", considers that those who will invest in the Proprietatea Fund over the long term may see more advantages over other categories of investors. The Analyst of Tradeville said: "Long term investors see more benefits because it takes time to increase the liquidity of the shares in the Fund"s Portfolio, and also because the Fund mostly follows the principles of value investing, which take time to reach their expected value.

The big discount over the NAV per share is another advantage of the stock. According to the latest estimate by "Franklin Templeton", the Fund is worth approximately 15.9 billion lei, the equivalent of 25% of the capitalization of the BSE, excluding "Erste Bank". Thus, there is a risk that any of the acquisitions or sales of shares in its portfolio would be made at very high, or very low prices, respectively, which would affect the value of the Fund. Due to the low liquidity, the risk remains that the difference between the price and the NAV per share may remain high in the future".