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US Ambassador: More state-owned companies should be run by professional managers
More state-owned companies should be run by professional managers and listed on the stock exchange, so that the depth and maturity of Romanian capital market can evolve faster, like the experience of other developing markets showed, U.S. Ambassador to Bucharest Hans Klemm stated on Tuesday.
A profound and liquid capital market would also provide a solid basis for growth, the US Ambassador explained, adding that, as the experience of other developing markets showed, the depth and maturity of the Romanian capital market would evolve faster if more state-owned companies were run by professional managers and were listed on the stock market. The Proprietatea Fund and Franklin Templeton could play a crucial role in the transition towards a significant and steady growth for Romania, the US Ambassador to Bucharest stated at a press conference on the occasion of the anniversary of five years since the listing of Proprietatea Fund on the Bucharest Stock Exchange (BVB).
According to the US official, the effects of the listing of the Proprietatea Fund on the stock market and of its being managed by Franklin Templeton have a spill over effect on the capital market in Romania and on the entire Romanian economy.
Under the management of Franklin Templeton, the Proprietatea Fund attracted an increased interest from international investors, promoting thus Romania and the Romanian capital market, Klemm explained. Franklin Templeton lobbied several governments, promoting initial public offers. Moreover, the Fund used BVB for the placement of shares at the companies in its portfolio with a total value of 445 million euros (484 million dollars), increasing considerably the stock exchange's liquidity, the US Ambassador added.
Klemm also pointed out that the secondary listing of the Property Fund on the London Stock Exchange raised Romania's visibility and that of the companies in the portfolio of the Fund.
The listing of the Property Fund had positive effects on the Romanian economy as a whole, the US Ambassador added. By attracting international portfolio investments of 1.2 billion euros, the Property Fund brought the Romanian economy the much-needed liquidity, Klemm explained.
According to the ambassador, the uninterrupted promotion by the Property Fund, in its position of minority shareholder, and together with Franklin Templeton, of solid corporate governance in state companies, helped raise the profitability of these companies.
The numbers speak for themselves: the net profit of the main 20 companies in the Fund's portfolio went up by 80pct between 2010-2014, to the benefit of companies, of their shareholders and of Romanian economy, the US Ambassador explained. After looking at the past of the Proprietatea Fund, let's ask ourselves how the future of Romania will look like, the diplomat suggested. I see potential for Romania to be a strong and rich country, he added. However, to achieve the sustained economic growth necessary to reach this objective, a strategic vision is needed as well as a profound administrative reform to set up a body of professional public servants, apolitical, competent and honest and a healthy, stable and transparent decision-making process, together with long-term planning and investments, Klemm stated.
According to the American diplomat, the Fund's listing on the BVB and the secondary listing at the London Stock Exchange highlighted Romania's potential as a destination for investors.
Before listing, the shares of the Fund were overvalued, trading on the grey market at a price 90pct lower than their nominal value, Klemm explained. As a result, the beneficiaries of restitutions would only receive around 10 bani for every leu of the value of Fund shares, the ambassador pointed out, adding that thus, as institutional investors did not have the opportunity to invest in the Fund, the appetite to invest in the Romanian capital market of Romanian and foreign investors, currently in development, would decrease. Currently, the Fund's shares are trading at 70 bani per share, an amount seven times higher than before listing, Hans Klemm concluded.