Analysis of the evolution of meeting requirements imposed by MSCI for the major companies listed on Bucharest Stock Exchange

Abstract

This paper is an analysis of the evolution of the Romanian candidate companies, based on the Morgan Stanley International Index (MSCI) criteria. The paper will offer a technical analysis on the evolution of Annual Traded Value Ratio (ATVR 12M) levels, Market Capitalization and Free Float Market Capitalization, (Mcap FF), of the Banca Transilvania, OMV Petrom, BRD Group Societe Generale, and Romgaz, companies that in 2017 were the main Romanian candidates to meet MSCI criteria. The paper will take into consideration data from January to December 2018. Based on the updated evolution, the paper is revealing what are the challenges and opportunities that are likely to influence the important Romanian companies’ economic evolution, as well as what measures could be taken to enhance the companies’ evolution and eventually lead them to reaching the minimum ATVR and Market Free Float Capitalization requirements imposed by MSCI. In 2018 a study was made analyzing these companies and the paper addressed the chances of the Romanian Capital Market to be upgraded to Emerging Market status. The study showed that increasing liquidity is the most difficult factor to be achieved by Romanian companies listed on the Bucharest Stock Exchange. Romania has the potential to be upgraded to the Emerging Market status if at least three companies met the minimum requirements, including the Annual Traded Value Ratio, requested by the MSCI. Following a technical analysis using the MSCI methodology, it was found that until the first part of 2018 three companies met the ATVR target of at least 15%, such as Romgaz, Banca Transilvania, BRD Group Societe Generale. OMV-Petrom reached only 12.62%. The company needed an increase in the total volume of the total stock market to bring the ATVR level to at least 15%. As for recommendations, BRD Group Societe Generale needed to increase the Free Float market capitalization by 1.0534% that should reach the minimum required by MSCI USD, 763 mln until mid-2018. Another recommendation, by increasing offer by listing more companies on the Bucharest Stock Exchange and increasing demand by attracting as many retail investors as possible and improving financial literacy, trade volumes would consistently grow. Data was collected from the Bucharest Stock Exchange, Trading Statistics section, and daily reports. This was computed the Annual Traded Value Ratios for 12 months (ATVR 12M) and ATVR for 3 months (ATVR 3M) for each company. The candidate companies included Romgaz, OMV-Petrom, Banca Transilvania, and BRD-Group Societe Generale. The methodology used is in accordance with the MSCI standard calculations.