The European Bank for Reconstruction and Development (EBRD) has acquired a 4.99% stake in the Bucharest Stock Exchange (BVB), the bank announced today. EBRD thus becomes one of the largest shareholders of the BVB, following a EUR 2.7 million investment.

Through this equity interest, the EBRD proves its support for the Romanian Government’s comprehensive capital market development programme, which aims to improve the functioning of the local capital markets, enhance liquidity and increase availability of debt and equity offerings in the local capital markets, according to EBRD.

The EBRD has invested in the state’s recent IPOs of electricity distributor Electrica and natural gas producer Romgaz, and has also participated in all bank bond issues in the last two years under a dedicated framework. It is also the largest shareholder of the third local bank, Banca Transilvania, which is also listed on the BVB, holding a 14.6% stake.

“The Bucharest Stock Exchange aims to act as a catalyst in financing the country’s economy. As a shareholder, the EBRD will assist in the further development of corporate governance at the bourse and in listed companies. We will work to establish the Bucharest Stock Exchange as the preferred exchange for Romanian issuers and traders, as well as for investors with an appetite for Romanian stocks and other financial instruments,” said EBRD’s First Vice President Phil Bennett.

Romania has set a goal for the Bucharest Stock Exchange to be upgraded to emerging market status. This would determine Romanian stocks to be included in the MSCI Emerging Markets Index, from its current placement in the MSCI Frontier Markets Index, and would bring more visibility and more capital inflows to the market. The EBRD will support legal and regulatory reforms to help achieve this goal.

“Our plan is to build a modern, well-performing capital market, with the Bucharest Stock Exchange at its heart. We want it to become the financial hub for southern and eastern Europe, a new centre for business and innovation, and thus to enrich the investment landscape of the region. I am proud that the BVB has a new shareholder in the financial world that demonstrates values which are crucial for economic growth and sustainable development,” said Ludwik Sobolewski, CEO of the Bucharest Stock Exchange.

Lucian Anghel, President of the Board of BVB, added: “The modernisation and development of the Romanian capital market, which began around a year ago, has already brought unprecedented positive results. Important steps now lie ahead of us which will enable the full implementation of the new market architecture.”

The Bucharest Stock Exchange has been listed on its own market since 2010 and currently has a market capitalization of EUR 53 million. Among its largest shareholders are Austrian group Erste, ING Pension Funds, American group Franklin Templeton, as well as Romanian investment companies (SIF) and brokerage houses.

As of September 2014 it listed 83 companies including the largest corporation in Romania OMV Petrom, Romgaz, Fondul Proprietatea, BRD Groupe Société Générale, Banca Transilvania, Electrica and Transgaz. The total market capitalisation is almost EUR 30 billion, including Austrian Erste Group and South-African investment fund NEPI, which are primarily listed on other markets but are also traded on the BVB.

The average daily share trading value has been EUR 11 million this year, which is still very low compared to other markets in the region, such as those in Hungary, Czech Republic and Poland.

Andrei Chirileasa, andrei@romania-insider.com