ANALYSTS: "The BSE will not remain unaffected by the conflicts in the Middle East, but it will be late to react"

Andrei Iacomi ((TRANSLATED BY COSMIN GHIDOVEANU)
English Section /

"The BSE will not remain unaffected by the conflicts in the Middle East, but it will be late to react"

Our capital market will not remain unaffected by conflicts in the Middle East, but will most likely react late, being less exposed to international events than other, more developed foreign markets, analysts consulted by BURSA newspaper said. They stressed that, however, in the case of major events, the shares listed on the Bucharest Stock Exchange (BVB) will be affected, but not by the events themselves, but by their reaction to the evolution of other financial markets.

These claims come as tensions are mounting in the Middle East, after Iranian Revolutionary Guard general Qassem Soleimani was killed by a US airstrike in Iraq at the end of last week. Tehran retaliated by firing several missiles at Iraqi military bases hosting US troops, an event that initially led to major increases in oil prices and steep declines in futures contracts on US market indices, fluctuations which later abated.

US President Donald Trump said at the White House last night that he would ask NATO to become more involved in the Middle East and that the United States would immediately impose new economic sanctions on Tehran.

"Iran must abandon nuclear ambitions and providing aid to terrorists," Donald Trump said, adding that US missiles are lethal and quick, but he does not want to use them.

Regarding the potential impact of the escalation of the conflict in the Middle East on our stock market, economic analyst Aurelian Dochia told us: "I think that, in general, the Bucharest stock exchange has a quite independent behavior when it comes to the moves of the foreign stock markets. Of course, in case of major international events, the stock market will not remain unaffected, but it will probably react late and not directly, due to the influence of the events themselves, but rather as a reaction to what is happening in other financial markets".

Aurelian Dochia added: "I think this situation reflects Romania's position quite well. We are not directly exposed to these international tensions and conflicts, but of course we are indirectly affected by what is happening around us. "

Dragoş Cabat pointed out that, the Bucharest Stock Exchange has just been designated as an emerging market, which will come into effect in September this year, so that it is rather weakly correlated with the developed markets.

Essentially, we are much less exposed to international events than other bigger stock markets. Sure, the market reacts, but rather as a result of the reactions of other markets coming towards us and for that reason the effect is less potent", Dragoş Cabat told us.

On the other hand, the CFA analyst pointed out that, in the case of major events, such as the crisis of 2007 - 2008, the volatility of the BSE quotations will probably be higher, because the market has a much lower turnover than others.

"Basically, our stock market is less correlated to external events but in extreme cases, volatility is higher than on international markets," said Dragoş Cabat.

For his part, Aurelian Dochia explained to us that, in general, our stock market is more volatile than the foreign ones, mainly because it is small.

"The turnover is so low that only a few transactions can generate major price fluctuations, i.e. high volatility. I would say that that is a structural volatility, due to the small size and depth of our market", concluded the economic analyst.

Yesterday, the indices of the Bucharest Stock Exchange closed the trading session, mainly down. BET-FI was the only one up 0.33%, while the pan-European STOXX 600 index rose 0.12%, after opening in the red.

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