Romania’s Stock Exchange, Promoted to Emerging Market

I don’t usually write news articles on this blog, but I believe that this particular topic is of an extreme importance for those considering to visit Romania in the near of far future, but especially those considering to make a move here.

Because, yes, as the title says it, Romania’s Stock Exchange – BVB, Bursa de Valori Bucuresti or the Bucharest Stock Exchange – whatever you want to call it, has just been promoted to Emerging Market Status from its former ranking as a Frontier Market.

The announcement comes from the official BVB website, which calls it a “historic moment” for the country – and I do agree that this is extremely good news with potential long-term implications and effects.

The Romanian Stock Exchange has been on the watch list for promotion for three years already, and it got the upgrade to Emerging Market on September 26th. However, the actual promotion won’t become active until September 2020.

“Romania’s upgrade to Emerging Market status represents an acknowledgement of the progress of the local capital market and represents a step of paramount importance in its development,” said BVB’s CEO Adrian Tanase.

“The investment grade of the country will be mirrored on the local stock exchange once the reclassification is done as the stock market is nothing but a faithful reflection of a country’s economy. When the stock market is doing well, the economy is doing well,” he added.

“Now, we are here facing a historic moment: it’s the international recognition that Romania deserves to be promoted and I am happy and proud to lead the team that made it possible”, BVB’s CEO further said.

What does this mean for Romanians, travelers and expats?

I would say that this is great news for most people, proving what I’ve been saying in previous articles in one form or another: Romania is developing, it is growing and it is getting better and better with each new year.

Right now, I could say that we’re in a pre-recession status: new buildings – both offices and living spaces – are built in most larger cities like there’s no tomorrow, salaries are increasing, the quality of life is increasing and things are looking really good in general.

There are indeed many voices who claim that the current growth is unsustainable and the many loans that Romania keeps piling up will eventually bite back – and do it hard – but the undeniable reality is that things are indeed looking good at the moment for the regular folk.

Of course, for people who want to visit Romania or consider relocating here because it is such a cheap country to live in, things become a bit more complicated.

This growth – which is confirmed by the promotion of the Romanian Stock Market – also comes with negative side effects: the cost of living is increasing. Rents are going up and prices for homes and apartments are at an all time high.

Another interesting thing is that other cities in Romania are growing a lot and Bucharest is no longer the only go-to place if you’re looking for financial gains, opportunities and things to do. I remember reading, a few days ago, that salaries in Cluj Napoca are now bigger than those in Bucharest, on average, while the rental prices were already considered the highest in the country.

I have recently been to Timisoara – and wrote about it in my updated article, and it was pretty obvious to me that it has grown tremendously in the past several years. The same goes for Oradea and I am sure many other cities in the country.

Beautiful Sibiu, Romania

How will the inclusion of the Romanian Stock Market on the list of Emerging Markets influence the prices, cost of living and everything else in Romania?

Most likely, it won’t have a huge impact for the regular people living here, although long term this promotion will definitely mean something.

Going one step higher on the stock market rankings means not only that more people will probably start investing in Romanian companies (as some will probably included in index funds and other similar things), but also foreign investors will look at Romania from a different perspective.

Having this official – and extremely important – confirmation that at least the business sector is doing really well will most likely boost growth and help the country to better overall.

This could also mean that the cost of living will continue to increase, but hopefully in parallel with improved health care, services and infrastructure.

Because, despite its current growth, Romania is still behind in many areas.

But fortunately, for most expats and travelers, the increased costs shouldn’t really pose a problem. Romania remains one of the cheapest countries in the European Union and its salaries – despite their constant growth – are still second to last in the EU.

And while living on $1,000 per month in Romania is getting more and more difficult, I still believe that is doable under specific circumstances and there are still many families (not individuals!) that make ends meet on a lower budget.

Back to the Bursa de Valori Bucuresti (the Bucharest Stock Exchange)

At the moment, there are relatively few companies listed on BVB: 84 of them, but still an increase compared to the 6 that were listed when the Romanian Stock Market opened back in 1995.

I did look at the prices of the shares of the most important companies listed there (as well as some random ones I knew little about) and the news doesn’t seem to have had a major impact.

However, the share prices have done, on average, really well this year, increasing constantly from month to month since January 2019 (after taking a massive hit in December 2018). The Romanian companies are also paying some of the best dividends in the European Union – and these things alone could make them really interesting to potential investors.

Still, since the actual listing of the Romanian Stock Market on the Emerging Markets won’t go into effect until September 2020, chances are that this announcement won’t have an immediate impact.

It might have none at all, but the important thing for most of us – those living or interested about making a move to Romania – is that this promotion signals, or confirms, the fact that Romania is growing and going full steam ahead. Which is both surprising and reassuring at the same time.

This is just part of the story, though. Things are not going really well on all fronts. For example, the local currency, the Romanian Leu, gets weaker and weaker against the important currencies of the world: both the Euro and the US Dollar are worth more and more Romanian Lei, but also other currencies.

This year, both the Euro and the US Dollar reached historical highs and they seem to keep going up, while the Leu is going down.

In other words, despite the increased cost of living that you can see in the country, expats and travelers depending on foreign currency won’t feel the effects as much, because both the Dollar and the Euro are getting stronger.

Which is definitely strange (although I’m not an expert). Still, you would expect to see things going well in all areas, right? But I believe that the fact that some areas do better while others not so much proves that there is still a lot of work to be done in Romania and there are still many things that have to start going upward – or be fixed – until we can wholeheartedly state that things are indeed getting better.

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8 thoughts on “Romania’s Stock Exchange, Promoted to Emerging Market”

  1. Exciting news indeed! I think anyone who can afford to invest in the Romanian stock market in companies that pay dividend can really get a bang for their buck! My tip is to always go for the “safer” companies like alcohol, and household goods, like soap. If there is Romania produced goods like Heineken beer, Nestle, etc…go for it! Something l learned from my father :-). A double edge sword indeed though. You want things to improve but the cost of living to stay low. Same thing l hope for Valencia, but it has been shifting quite a bit as far as rental prices, thanks to the influx of newbies. Even in the last two years, we have seen quite a bit of rise in the rental market. Seems you’re seeing the same there, and it’s only going to get worse. It’s going to be interesting to watch the coming changes.

    • I was surprised to find out that Romanian companies pay such amazing dividends. They seem like the best option for somebody who doesn’t really fave a solid feel for the market. Thanks for the extra tips as well!

      Regarding the prices… indeed, that’s exactly what everybody wants: high quality of living and low costs… which can’t really go well hand in hand. Let’s see how this goes because more and more people are talking (worldwide) about a coming recession – but they’ve been doing it for 1-2 years already and everything still goes up.

  2. As an expat, I feel excited getting to witness the growth that is underway in Romania. I’ve witnessed it before – as a child of the 50s and 60s in the States when there seemed to be no end to opportunity, and during the 1990’s when my hometown of Riverside, California was the second fastest growing city in America. However, both of those boom times came to a crashing halt. I believe it could be different here, though. I’m hoping this country, which has seen devastating misfortune in the past, can endure an inevitable economic downturn. Romania, at least in the larger cities, seems to be overcoming spectacular odds in order to raise it’s living standards. I would love to see this growth sustain itself in a way that will benefit individuals and the nations infrastructure rather than end up more of a burden on the less fortunate.

    • Exactly, very well put. Sustainability is the key here and the main concern for those who are not eagerly optimistic. I personally have my doubts regarding this sustainability for the long term (maybe even the next few years), but we’ll see how it goes: smart people can definitely find solutions to make it work, it’s up for the Romanians to make sure that they choose them to lead the country.

  3. As some say, “perception is everything” and one has to turn off the negativism when Romanians finally feel things are improving. I invested in some Romanian euro bonds in the past and did very nicely. They have long since matured and have become a fond memory, especially the 10% interest they paid! Those high interest days are long gone and Romania now borrows at around 4% which is typical for an emerging market economy. There is also an interesting investment fund called Fondul Proprietatea that I believe is listed on the BVB and even in London. It was originally designed as a way to compensate Romanians who had lost property during the communist era. Rather than return that property, they were offered shares in this fund that contained stock in public and privatized companies. It seems to be doing very well in 2019 but so are most other stocks. Here in Japan, the government is pursuing a “moderate inflation” economic program which gives everyone the illusion that things are getting better. Salaries are inching up, prices are getting higher but it’s really just more money chasing after the same labor and goods. For foreigners who rely on the dollar or the euro, that’s just fine. For low income people it’s not.

    • The government indeed released new bonds this year if I am not mistaken – and I think you can still get some, at least in theory (not sure if they are available or not, but the rates are indeed lower). However, they beat banks who offer 1% in the best case scenarios for long term deposits.

      Fondul Proprietatea is indeed doing really well… I was looking at it yesterday when writing this article and I was surprised to see it do so well. But most companies and stocks are green right now, like in most places over the world.

      And regarding the wages and cost of living, things are similar in Romania: I know I did an analysis at some point this year and, with inflation and increasing exchange rates, the result was that people were actually earning less in real value than they did last year or a couple of years ago.

      But sometimes, the calculations somehow manage not to reflect the reality and the truth is that indeed most Romanians have an improved quality of life.

  4. Hey Calin,
    Learned NOT to “do” the stock market. It’s fine if you like to take chances, and love the thrill of the ride.
    Invest in precious metals or land–that’s the thing, IMHO.
    Glad to see the Romanian economy growing, and the good people reaping the benefits of their hard labor.
    Maybe the Romanian diaspora will reverse, especially with Brexit. (And I thought the USA was screwed up!;-))

    • Romania is doing well, but still very few people who left consider coming back and many of the younger people I know can’t wait to finish their studies to move out. But we’ll see if this changes in the next few years…


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