Losses on Bucharest bourse to deepen further if govt moves on with fiscal overhaul - analyst

December 19 (SeeNews) - The Romanian stock indices could continue to fall if the government moves on with a massive unexpected fiscal overhaul announced on Tuesday evening, a local stock broker told SeeNews.

"At one point the market will reach a balance. If the measures remain the ones announced in this initial project and do not change, there is a good chance that the balance is going to be found below, and the decreases we have witnessed today will continue so that the indicators of the companies will become more attractive," Simion Tihon, equity trader and analyst at Prime Transaction, told SeeNews in an emailed statement.

All share indices of the Bucharest Stock Exchange (BVB), the biggest bourse in Southeastern Europe, lost ground in morning trading, with the blue-chip BET index losing 7.5% by 0830 CET. On Tuesday, the BET index closed 1.24% lower at 8,419.19 points.

On Tuesday evening Romania's finance minister Eugen Teodorovici told a press conference that the Social Democrat government will approve an emergency decree on an ample fiscal overhaul that proposes, among others, a 'greed tax' for banks, capping gas prices, as well the enforcement of new rules for private pension funds.

"These are several measures with a cumulative negative impact on the stock price. The tax on assets could halve the profit of banks listed on the BVB - surely, all banks are affected, but the listed ones we can see the market assessment immediately. Then, capping the sale price of natural gas affects other companies. All these companies - banks and firms from the energy sector account for over 60% of the BET index, which is why it has been significantly affected today. In addition, the possibility of withdrawing from pension pillar two affects all companies listed on the BVB," the broker said.

Turnover on the BVB surged to 935 million lei ($230 million/209 million euro) in a massive sell-off in morning trade on Wednedsay, as the main transactions were with shares of aluminium smelter Alro [ALR], of lender Banca Transilvania [BSE: TLV] and of financial group BRD Societe Generale [BRD].

"It's hard to give advice at this time. But I would like to say that there are opportunities in tension moments. As such, where exaggeration occurs, investors should be careful and try to use the panic imbalances in their favor so that they can exit this period well," Tihon concluded.

The BVB said on Wednesday in a press release that it took note of the negative effects reflected in major downfalls of the stock market indices as a result of the recently announced government emergency decree.

"The investors are paying special attention to the actions of policy makers that influence the economic environment and the evolution of listed companies, a major aspect of the investment process being given by predictability and legislative stability," the BVB said.

(1 euro = 4.6571 lei)