Romanian capital market : on the road toward an emergent market status

Abstract

Capital markets have become one of the drivers of economy growth in frontier and emerging economies and Romanian case is no exception. Bucharest Stock Exchange is the second capital market in Central and Eastern Europe by the number of IPO successfully concluded in 2017 and is the sixth in terms of the largest return among world capital markets. In recent years, Romania’s capital market has made significant efforts in order to upgrade to the emergent market status in terms of development of market infrastructure, increasing the accessibility and attractiveness of the Romanian capital market through listing of public and private IPO’s. Our research is focused on a quantitative approach – content analysis, by taking into consideration the ratings of FTSE Russell and MSCI considering Romania’s country classification. The results of our study indicate that despite the positive changes, Romania’s rating as a frontier market implies a set of challenges that Romania must face in order to become an emergent capital market: free and well-developed equity market- market accessibility and facilities for international investors and liquidity. A very important criterion for Romania to achieve the emergent capital market status is represented by listing new public (such as Hidroelectrica and the National Company Bucharest Airports) & private IPO. The evolution of BET and BET–TR as compared with the evolution of CDS over 2007-2017 shows that BVB is very sensitive to the country risk, which also influences foreign capital investments.