Romania’s Stock Market Soars, Poised for Further Growth as IPOs and MSCI Upgrade Loom
Romania’s stock market is experiencing a surge in popularity, attracting investors with its robust performance and promising future prospects, Bloomberg reports.
The BET stock index, Bucharest’s benchmark, has delivered a remarkable 40% return in dollar terms over the past 12 months, placing it among the top performers in Europe.
This impressive rally has propelled the index close to its all-time high, fuelled by a renewed interest in the Romanian bourse. The landmark $1.8 billion initial public offering (IPO) of Hidroelectrica SA, a renewable-power utility, in 2022, attracted a wave of foreign investors who, in turn, reignited local interest, driving up valuations and trading volumes.
“The fundamental drivers are there to keep the Romanian market performing well,” said Andrei Nedelcu, chief investment officer at SAI Erste Asset Management Romania. “Future IPOs are expected to sustain this momentum,” he added.
The improving macroeconomic outlook is further bolstering investor sentiment. Romania’s economy, while experiencing a slowdown, is projected to rebound, aided by interest-rate cuts and moderating inflation.
The potential for an upgrade to emerging market status from its current frontier market classification by MSCI, possibly as early as next year, adds another layer of excitement. Adrian Tanase, CEO of Bursa de Valori Bucuresti SA, the operator of the Bucharest Stock Exchange, believes Romania meets MSCI’s criteria for market accessibility and listed company requirements, but needs to improve liquidity.
Attila Gyurcsik, CEO of Accorde Fund Management, anticipates MSCI’s upgrade during its summer review, potentially around mid-2025. Notably, while Hidroelectrica’s shares have seen a modest 11% gain in dollar terms, other stocks on the BET index have driven the market’s impressive performance. The BET currently boasts a price-to-equity valuation comparable to MSCI’s emerging-market benchmark index, outperforming even Warsaw’s larger stock market.
Dan Popovici, CEO of OTP Asset Management Romania, whose firm’s equity fund has outperformed 97% of its peers in 2024, believes the valuation boom is sustainable. He is particularly bullish on Romanian banking stocks and cites upbeat retail sales as a signal of continued economic growth. Economists anticipate GDP growth of 3.5% in 2025, up from 2.7% this year.
While the positive sentiment is palpable, investors are mindful of upcoming elections in December, both general and presidential, as well as the government’s plans to tackle the EU’s largest budget deficit.
Despite these concerns, the mood in Bucharest remains optimistic, buoyed by the successful Hidroelectrica IPO and the prospect of further government divestments, including a potential stake sale in the Bucharest airport authority. The local bourse is also preparing to launch derivatives trading, encompassing stocks, the equities benchmark, and electricity, by mid-2025.
