Today Romania can feel it has integrated with the financial markets of Central and Eastern Europe: the near 2bn euros brought to Romania by special purpose vehicles set up to place speculative capital is now beginning to pour out of the country, with other withdrawals being seen on neighbouring markets from Budapest to Prague.
The rising yields in the United States, coupled with the induced security of placements on the American market, have made investors cash in their Central European profits and take most of the money overseas.
As a result both currencies and shares listed on markets in the CEE region have fallen constantly in the last two days in a spectacular reverse of the growth trend that had turned them into a haven for speculative capital.
The Polish zloty shed one percent against the euro yesterday alone, accumulating a 3.18% decline over five days in a row. Similar trends can now be seen with the currencies of Slovakia (minus 2.46 %), Czech Republic (minus 1.63%) and Hungary (minus 1.58%).
Although until recently reactions of the Romanian market to international developments would have been contained to marginal influences caused by the EUR/USD rate, now the connection with the rest of the world initiated by the foreign capital introduced last year is becoming visible. In the space of only two days, the EUR/ROL rate lost more than 500 points, with the Romanian currency the biggest loser against the euro: 1.5% in only one day.
The capital withdrawals are even more visible on the Bucharest Stock Exchange (BSE), where sell orders have been plentiful in the last couple of days. Shares listed on the BSE, by far the most profitable in the whole region since the beginning of the year, have fallen 12% from the beginning of the week. Most investors are still making profits though, with yesterday's stock quotes 20% higher than at the beginning of the year. The same goes for ROL, which retains its position as leader in the group of currencies that have seen very high growth against the euro since the beginning of the year. The ROL had strengthened by over 8% against the euro until yesterday, while the Polish zloty dropped by 0.6%.
This data does not affect the downward trend signalled in the last two days, however.
The decline in the prices for shares listed on the BSE grew steeper yesterday as the market dropped nearly 7%. Brokers, who just a few days ago were saying that the decrease in prices was only a negative correction, have started to talk of panic among investors. Listed companies saw their value shrink by no less than one billion euros between Wednesday and Thursday, with most of the market believing the decline is due to Romanian investors that started to sell once they saw the market go down.
Added to all of this there was lack of large buy orders from foreign investment funds.
"I believe investors have started to collect on their profits from the markets in the region after the increases in the first two months of the year. The markets of the region are interconnected because the institutional investors are practically the same. Added to this came the panic among Romanian investors. I don't think our market witnessed significant foreign capital outflows because the traded volume was rather low," says Liviu Giugumica, the manager of BRD Securities, BRD SocGen's brokerage firm.
razvan.voican@zf.ro ; vlad.nicolaescu@zf.ro
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