For the first time in history, the Romanian capital market is included, starting from yesterday, in the Emerging Markets indices, according to the classification of the global index provider FTSE Russell.
The promotion of Romania to the Emerging Market status after 25 years from the re-establishment of the local stock exchange, a fundamental institution of the Romanian capital market, represents an unprecedented success.
Starting from 21 September (yesterday), Romania is included in the Emerging Markets indices according to the classification made by FTSE Russell, and this event was possible after the global index provider announced in September 2019 that Romania would be promoted to the Secondary Emerging Market status from the Frontier Market status. Note that the decision came after Romania had been retained on the Watch List for three consecutive years.
The BVB state that the effective promotion to the Emerging Market status will allow the Romanian capital market and economy to absorb new funds in the coming years and sends a strong signal to privately-owned and state-owned companies that they can grow significantly via the stock market. New investment funds that manage billions of euros will be able to invest in the Romanian companies listed on BVB, which was previously impossible due to the restrictions generated by the country’s former Frontier Market status.
Two Romanian companies, Banca Transilvania (TLV) and Nuclearelectrica (SNN) have met the necessary criteria to be included, starting from 21 September, in the All-Cap indices dedicated to Emerging Markets according to the classification of the global index provider FTSE Russell. The contribution of the two companies was decisive for the upgrade of the entire market, as the promotion took into account the presence of companies in the All-Cap indices (which include Large, Medium, and Small Capitalization companies, excluding the Micro-Sector).
As a result of Romania’s upgrade to the Emerging Market status by including the issuers Banca Transilvania and Nuclearelectrica in the FTSE All-Cap indices, which are representative for the upgrade to the new market status, other Romanian companies listed on the Bucharest Stock Exchange can benefit from the inclusion in the Emerging Market indices. According to the FTSE Russell classification, the first Romanian company that benefits from the market upgrade is TeraPlast. Consequently, starting from 21 September, TeraPlast becomes the first Romanian company included in the FTSE Global Micro-Cap index. The Micro-Sector is not taken into account by the global index provider in the decision regarding the country upgrade.
The aforementioned reclassification definitely seemed to have an impact on yesterday’s trading as BET ended the day in red (-2.46%). Meanwhile, Banca Transilvania witnessed quite a high decrease of 6.5%, while Nulcearelectrica ended the day in green with an increase of 1.11%. Such a decrease of TLV could arguably be attributed to the selloff by the funds who are tracking the Frontier Market index.
