Yesterday, we analyzed the bid/ask spreads of Croatian and Slovenian blue-chip stocks. Today, we turn our attention to Romanian blue chips, bringing you an overview of this metric for one of the most interesting markets in the region.
Compared to the Croatian and Slovenian stock exchanges, the Bucharest Stock Exchange is relatively large, despite being small by developed market standards. The main index of the BVB comprises 20 blue chips, while Croatia and Slovenia have 10 and 9 blue chips, respectively.
Romanian companies generally have solid market liquidity, with significantly higher retail investor participation. This makes Romanian stocks easier to trade, even in large quantities. Consequently, the average bid/ask spread for these companies is below 1%.
Average bid/ask spread of Romanian blue chips in 2024 YTD (%)
Source: Bloomberg, InterCapital Research
Additionally, 15 out of the 20 Romanian blue chips have at least one dedicated market maker, with more than a third having two, and Fondul Proprietatea boasting three. Even on specific days, the bid/ask spread remains mostly between 0% and 3%, with only MedLife exceeding this range at 3.6%.
Price change of Romanian blue chips in 2024 YTD (%)
Source: Bloomberg, InterCapital Research
Remarkably, this tight bid/ask spread persisted even as most Romanian companies experienced significant growth throughout the year. Twelve out of the 20 companies achieved over 10% growth, and nine companies exceeded 30%. However, five companies recorded negative returns.
The overall growth of Romanian blue chips necessitated frequent price increases in 2024. During these periods, the bid/ask spread widened but remained relatively narrow. This stability is a hallmark of a more developed market, creating a positive feedback loop that fosters further development. Good liquidity and low transaction costs attract more retail investors, enhancing liquidity and perpetuating the cycle.
Romania’s example offers valuable lessons for other regional markets. The coordinated efforts driving development in Romania could be emulated elsewhere. While Croatia and Slovenia have made progress, they could benefit from a more defined capital market development strategy, higher retail investor participation, better regulatory incentives, and new listings of companies, especially the government-owned companies (at least partially, as was done with Hidroelectrica in Romania), among other things.
