Political uncertainty hits Romanian listed companies

Political uncertainty hits Romanian listed companies
The Bucharest Stock Exchange's blue-chip BET index fell 2.35% on December 3. / BVB
By Iulian Ernst in Bucharest December 4, 2024

The BET index, the Bucharest Stock Exchange’s (BVB’s) blue-chip benchmark, fell sharply by 2.35% on December 3, driven by investor concerns over political instability following the weekend’s parliamentary elections. The decline represents the steepest drop since August 5 and the second-largest for 2024.

The first round of Romania’s presidential election on November 24 resulted in a shock lead for little-known far-right candidate Calin Georgescu. Nationalist parties also performed well in the general election on December 1, with the Alliance for the Union of Romanians (AUR) coming in second behind the Social Democratic Party (PSD). The result of the presidential election second round on December 8, pitting Georgescu against reformist candidate Elena Lasconi, is likely to determine the formation of Romania’s next ruling coalition. 

Despite an initial 0.76% rise early on December 3, optimism about a potential broad democratic coalition faded by the day’s end. 

Market volatility reflected investor apprehension over unclear economic policies should Georgescu win the presidential election.

Losses were broad-based, with notable declines in major stocks. Antibiotice Iași (ATB) fell 7.6%. Transport Trade Services (TTS) dropped 6%. Sphera Franchise Group (SPH) slid 5%. Purcari Wineries (WINE) decreased by 4.9%. Teraplast (TPL) ended the day down 4.3%.

These losses erased a 0.6% gain recorded on December 2, when markets had briefly rallied on the initial general election results. Cumulatively, listed issuers saw their market capitalisation decrease by RON3.3bn (€660mn) during the December 3 session.

Investors have adopted a cautious approach amid the lack of clarity over Romania's next government, especially after the Social Democrats indicated they are open to negotiations with nationalist parties. 

Costin Brumă, a broker at Swiss Capital, commented: "The stock market movements reflect investors’ perceptions regarding the elections, political leaders’ rhetoric about forming a government, and support for the presidential elections, which collectively influence predictability for future economic policies."

Amid market turbulence, the National Bank of Romania (BNR) maintained stability in the foreign exchange market. The euro-leu exchange rate held at RON4.9770 to the euro on December 3, reflecting only minor movement since the presidential elections began. However, Cristian Popa, a member of the BNR board, noted signs of increased capital outflows.

Adding to concerns, yields on Romanian government bonds have risen, indicating growing risk perceptions. Despite these pressures, the BNR’s interventions have so far prevented significant currency volatility.

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