Brexit could be an opportunity for Romania to consolidate its capital market institutions. The statement was made by Ludwik Sobolewski, Director General of the Bucharest Stock Exchange (BVB). He believes that the dual listing of Romanian companies, on the Bucharest and London stock exchanges, has served only to fragment their liquidity.
“Against this new backdrop, many European Union level decisions will be abandoned in the following years. So Romania has to act, it needs more stability and development in this situation. The capital market has to be one of the pillars of this stability and development. (…) When I’m saying that capital market institutions have to be backed by the Government I am not talking about verbal support, I’m talking about real action. In this context, I hope that it will become more obvious that a development strategy based on the listing of companies on other stock exchanges is nonsensical,” Sobolewski explained at a conference.
According to him, several years from now Romanian companies listed in London could be trapped without having the possibility to hike their capital.
The BVB representative also said that he understands the reason why Romgaz and Electrica were listed in London too, in order to attract new investors, but he does not understand the secondary listing on the British stock exchange of already listed companies such as OMV Petrom.
The disadvantages of dual listing have already been visible following the referendum in United Kingdom, when the liquidity of Romanian companies listed there was lower than in Bucharest, however volatility was higher. “The companies lost more value in London than in Bucharest. The price exposure mechanism works better where liquidity is higher. Unfortunately, secondary listings have led to the fragmentation of liquidity for Romanian issuers,” the head of the Bucharest Stock Exchange added.