Service sector starts to gain ground on stock market

The structure of the Romanian capital market will change over the following years, with most future flotations on the Bucharest Stock Exchange coming from the services sector.

The growth tendency for the services sector as proportion of stock market capitalisation is clear to see – 11 of the 13 companies floated over recent years came from the service sector, according to a survey by Intercapital Invest, a brokerage firm.

“At this moment it”s clear that the structure of the capital market will undergo changes in the coming years, however it is unclear at what pace these changes will occur. If the developments come exclusively from the private sector, the pace will be slower; but if the state offers a helping hand by listing some of the major companies it owns stock in, the changes could be quite spectacular,” believes Razvan Pasol, InterCapital Invest chairman.

Pasol says that the structure of the capital market must change so as to reflect the current structure of the economy, where services dominate. The tone was set by companies in the financial services sector, which were more open to the idea of floatation on the capital market and currently are approaching almost one third of the BSE”s capitalisation. Other branches of the services sector are very weakly represented on the stock market, however, with only 0.2% of capitalisation.

From this point of view, this year”s listing of IT retailer Flamingo International represented a first for the Romanian capital market and paves the way for new listings.

“At the moment there are enough large private firms working in tourism, real estate, retail, food and foreign trade, as well as distribution companies and consultancies, all of which that meet the necessary conditions for listing on the stock exchange. Though these companies are not as large as Petrom or Sidex, they are powerful enough to sustain the development of the market,” says Pasol, adding that, “the listing of some major service companies is likely to attract more foreign investors to the BSE, and, more importantly, this will attract other categories of investors, not yet present on the market, as shown by the Flamingo listing. All this will contribute to the strengthening of the domestic capital market.”

The development of the services sector on the stock exchange is also supported by the high profitability rates derived both at the level of the economy and on the capital market. Financial services companies now register profitability rates of 40%. andrei.chirileasa@zf.ro