Romanian capital market
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Since the Romanian Revolution of 1989, successive Romanian governments have tried to promote reform programs in all sectors: politics, economics, civil rights, local administration, etc., and these changes have been rapid. Among these measures has been the establishment of the modern Romanian capital market. Development of a Romanian capital market was founded on the privatisation program, in which shares in more than 5,000 companies, property of the Romanian State, were granted for free to the population.
The Romanian capital market has two main components: the Bucharest Stock Exchange (BSE) and the over-the-counter market called RASDAQ. Currently, there are over 250 companies listed on BSE and more than 5,000 on RASDAQ.
The Romanian capital market has some unusual aspects. For example, a significant portion of share capital for the listed firms owned by the Romanian State was transferred, free of charge, to the population. Therefore, the market's downward slope could be the consequence of initial over-valuation or later under-valuation of these capital shares. Another particularity for the Romanian financial market is the high rate of return for government bonds, which is one of the greatest in the economy, exceeding the interest rate for the banking deposits and return on equity for most firms. As a result, investments are oriented to government bonds and the demand for equity shares is decreased. This aspect could be a supplementary cause for anomalies in rational fundamental valuation.
