Basescu cites battle for SIF shares in anti-corruption speech

The five financial investment companies (SIFs) on Wednesday night became the last subject approached by President Traian Basescu in relation to the interest groups in the economy, groups he associated with the FNI, Rafo and Rompetrol affairs.

Yesterday, the SIFs broke the upward trend on the Bucharest Stock Exchange they had maintained over the last few weeks, which could have something do, according to some brokers, with the President”s statements. Other analysts, however, say Basescu”s speech can be seen as a positive signal for investors.

“This is a tremendous battle, and if until now I have avoided the use of the ”mafia-type group” term, now I will no longer avoid the word. You will see media trusts battling other media trusts, because behind them are owners who are either defending Rafo or Rompetrol, or the illegal activities at FNI; they are either defending or hiding under a cloak of ignorance the vigorous activities undertaken to get as many SIF shares as possible, or we learn that we intend to participate in the privatisation of CEC, since we do control some SIFs – and many of you are well aware of what I”m talking about,” Basescu stated on the occasion of the review of the Ministry of Administration and Interior”s performance last year.

The SIF shares ended the day with a 1.4% decline, after having traded for even less than that during the day. Decline was the prevailing trend on the entire Stock Exchange yesterday.

The SIF representatives say that investors are already known to be accumulating stocks in these companies and there is a risk that they will gain control. “Some groups are known to exist on the market that are accumulating SIF shares; with a 40-50 million-euro investment you can get control of a SIF due to the very scattered shareholder structure. The SIFs were created for small investors. Whoever has tens of millions of euros can invest in a factory, for instance,” says Pavel Szel, the chairman of Muntenia Invest, the company that manages SIF Muntenia. The five SIFs are worth approximately 2 billion euros on the Bucharest Stock Exchange. “I did not understand what the president meant about CEC,” Szel added.

Rumour on the market has it that the SIF bosses toyed with the idea of participating in the privatisation of Casa de Economii si Consemnatiuni (Romanian Savings Bank – CEC). SIF representatives, however, made no official statement in this regard.

The stake cap for SIFs was upped from 0.1% to 1% by a government ordinance last year. Moreover, unlike the old 0.1% cap, the 1% cap applies to each legal entity, regardless of whether it is acting in tandem with another entity that owns a stake or not. According to the previous provisions, members of a group of entities that acted in tandem were not allowed to own more than 0.1% in any single SIF. The SIF managers reluctantly conceded to the raising of the threshold, arguing that the SIFs could be taken over by powerful investors.

On the other hand, brokers say that this is a free market and they see no problem in having investors buy massive amounts of SIF shares.

vlad.nicolaescu@zf.ro