FTSE Russell, one of the biggest providers of global indexes and trading data in the world, has decided to place Romania on the watch list for possible reclassification as emerging market.

If Romania achieves emerging market status, this would theoretically bring more foreign investors and more money on the Bucharest Stock Exchange and would allow Romanian companies to get better financing opportunities on the capital market.

Romania is currently a frontier market, but FTSE Russell will consider it for an upgrade to secondary emerging market status on short or medium turn. The upgrade will depend on the progress as regards the market liquidity and the presence on the market of largest companies with significant individual liquidity.

"Romania being on the watch list and now on a clear route towards Emerging Markets is one of the most defining and important events in the whole history of the Romanian capital markets. It is the effect of the tremendous progress in reforming the market infrastructure, according to the goals set in the program for the removal of barriers impeding the normal development of the market, and in the business strategy of the BVB, which must be implemented in a decisive way," said Lucian Anghel, President of the Board of BVB.

Every September, the FTSE classification committee meets to decide upon country classification. If a market meets all the criteria, it enters on a short list to be promoted to a higher category. Besides FTSE Russell, three other widely recognized international institutions - MCSI (USA), S&P Dow Jones (USA) and STOXX (Switzerland) - are currently rating the Romanian capital market.

The criteria to be met and analysis process are relatively similar and relate mainly to the value of transactions and size of listed companies, as well as the fast access to the capital market for investors and how they can buy and sell shares.

"We are thinking positively about the future, because we have been defining in the right way processes that must have been started and changes that must have been implemented, and, moreover, we had a capability and knowledge to prioritize the execution and not to allow severe mistakes to happen on that road. This was just recognized by one of the most respected global agencies rating the markets. There are still meaningful problems to be solved, and I hope that the pace of this process, where BVB often needs a constructive cooperation of other institutions, will be fast," said Ludwik Sobolewski, CEO of the Bucharest Stock Exchange.

The Bucharest Stock Exchange has a total market capitalization of EUR 31 billion, of which almost EUR 15 billion comes from Austrian group Erste and South-African real estate developer NEPI, which are primarily listed on other markets. The biggest local companies by market capitalization are oil&gas company OMV Petrom, gas producer Romgaz, and investment fund Fondul Proprietatea.

The average share trading value on the Bucharest Stock Exchange in the first nine months of this year has been EUR 7.4 million, down from EUR 7.9 million in 2015. The low liquidity is one of the major obstacles that have kept Romania from being promoted to emerging market status.

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editor@romania-insider.com