In the following lines, we aim at studying the function of reflecting the economicand currency conjuncture at a certain point and from a certain perspective anduncorrelations in the value stock exchange in Bucharest.the stock exchange, index, market

Teodor Hada

English

Research Papers in Economics

  294
UNCORRELATIONS IN THE VALUE  
STOCK EXCHANGE IN BUCHAREST  
 
 
Professor PhD Teodor Hada 
“1 Decembrie 1918” University of Alba Iulia 
e-mail: dbucur@uab.ro 
 
 
ABSTRACT: In the following lines, we aim at studying the function of reflecting the economic and 
currency conjuncture at a certain point and from a certain perspective and uncorrelations in the 
value stock exchange in Bucharest. 
 
Keywords: the stock exchange, index, market 
 
JEL Codes: G10, G15 
 
 
  The Political Economy Dictionary
1, on page 79, shows that ‘the stock exchange represents 
an organized and specialized public market, where buying and selling operations are done in large 
quantities of goods that are more or less homogeneous…’    
  In 1995, by the CNVM no. 20/21.04.1995 decision, the value stock exchange is established 
in Romania and in Regulation no. 1/1998 of organization and functioning of the Bucharest stock 
exchange it was stipulated that:  
  - ‘The activity of the stock exchange takes place according to the Law no.52/1994, with the 
purpose of organizing a well built market in order to negotiate the allowed building values and 
ensure the public, through the activity of the authorized intermediaries, of some proper systems, 
mechanisms and procedures in order to continuously perform transactions with building values 
adequately’.   
Most specialists think that the value stock exchange has the following functions:  
-  The function of concentrating the demand and the offer of securities;  
-  Functions of performing transactions with securities;   
-  The function of systematic registration of their exchange rates;  
-  The function of reflecting the economic and currency conjuncture at a certain point and 
from a certain perspective.  
In the following lines, we aim at studying the function of reflecting the economic and 
currency conjuncture at a certain point and from a certain perspective.   
A first BVB correlation should start from the natural connection between the evolution of 
the main indexes on the international markets and the indexes of the BVB market.  
 
                                                 
1 The Political Economy Dictionary, coord. Niţă Dobrotă, The Economic Publishing House, Bucharest, 1999, p.78-81.   295
The Dow Jones Industrial Average Stock Index 
  The graph is as it follows:  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fig. no. 1.  -  The evolution of the main stock exchange indexes on the international markets 
between October 2006 and August 2008  
                               
From the data of the graph we can notice that the Dow Jones index in the analyzed period 
(October 2006-August 2008) registered maximum values of 14200 points in October 2007 and 
10700 points in July 2008, decreasing almost 25%, and in August 2008 it registered values of 12000 
points, thus decreasing with 15.5%.   The graphic representation of the S & P 500 index is:   
 
The S & P 500 Index 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fig. no. 2 - Index     296
The points registered by this index varied from 1580 points in October 2007 to 1200 points 
in July 2008, thus decreasing with 24%, at present (August 2008) it has values of 1320 (decreasing 
with 16.5%). The evolution of this index is as it follows: 
 
The Nasdaq Index 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fig. no. 3 - Index   
 
The variation of this index was of 690 points (decreasing with 24.3%), 2850 points in 
October 2007, 2160 points in July 2008.  
  We also present the correlation between the Dow Jones index and the price of gold.  
 
    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
 
Fig. no. 4. - The DAX Index (Germany) 
   297
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fig. no. 5   
 
Its variation was between 8190 points in July 2007 and 6000 points in July 2008, thus 
decreasing with 28.2%. In August 2008 it registered 6600 points, thus decreasing with 19.5%.   
 
The FTSE Index (Great Britain) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fig. no. 6  
 
This index varies between 6700 points in July 2007 and 5100 points in July 2008, 
registering a decrease of 24%. At present, August 2008 has values of 5600 points (with a decrease 
of 16.5%).  
   298
The CAC Index (France) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fig. no.7 
 
This index registers values between 6190 points in July 2007 and 4000 points in July 2008, thus a 
decrease of 35.4%. In August 2008 it registers values of 4600 points, thus decreasing with 25.7%.  
 
The HONG KONG Index 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fig. no. 8   
 
The maximum value was of 32000 points in September 2007 and the minimum of 19200 in 
August 2007, the decrease being of 40%. At present, (August 2008) the registered values are of   299
21900 points, the decrease being of 31.6%. The correlation between the Dow Jones index and the 
oil price is: 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fig. no. 9 The evolution of the oil price  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fig. no. 10 
 
The variation of the oil price is presented in the figure above. It increased from 60$/barrel in 
February 2007 up to almost 150$/barrel in June 2008, increasing 2.5 times. At present, (August 
2008) it varies under 115$/barrel with decreasing tendencies.  From the data mentioned above what 
results is that the stock exchange indexes on the main markets significantly decreased with 24%-
25%, the indexes on the American market with 28.8%, the DAX, FTSE indexes with 24%, CAC 
with 35.4%, Hong Kong with 40%.  
We mention that in August the tendency of recovering the losses from the previous months 
was maintained, continuing to decrease in September 2008. The main causes that determined the 
decrease of the stock exchange indexes on foreign markets are:  
-  The mortgage loan crisis in the U.S.A.;    300
-  The increase of the oil price;  
-  The danger of bankruptcy of some banks in the U.S.A.;  
-  The forecast of the beginning of bankruptcy in insurance companies;  
-  The wars in Iraq and Afghanistan;  
-  The increase of the unemployment rate in the U.S.A. 
The main BVB indexes are as it follows:  
          Table    no.  1 
The evolution of the main stock exchange indexes on the Romanian market  
Indexes   THE  DATE 
 30.06.2007  31.12.2007 30.06.2008  31.07.2008  31.08.2008 
BET 9665.61  9825.38 6502.65 5948.77  5420.87
BET C  6559.52  6665.47 4637.50 4385.25  4080.00
BET FI  87432.87  78669.68 46270.19 34582.00  32942.6
ROTX 21742.01  21705.00 14843.22 13983.65  12927.58
 
Compared to 30.06.2007 from the above data, what results is that the stock exchange 
indexes in  31.08.2008 decreased as follows: BET (44,8%), BETC (38,8%%), BETFI (58,1%) and 
ROTX (40,4%). From the percentage above what results is that the highest decrease registered in 
the analyzed period was that of the BETFI index, of 58.1%, and the other indexes had a decrease of 
about 40%.   
The stock exchange indexes on the RASDAQ market registered the following values:  
 
          Table  no.  2 
The stock exchange indexes on the RASDAQ market 
Indexes 30.06.2007  31.12.2007  30.06.2008  31.07.2008  31.08.2008 
RASDAQ - C  5052.21  4628.55 4259.68 4142.63  4011.33
RAQ I  4876.50  4496.91 3756.25 4199.02  3865.67
RAQ II  10074.43  8201.16 6726.54 6980.64  6799.19
 
Compared to the values registered on 30.06.2007, the decreasing values registered on 
31.08.2008 were of 20.6% for RASDAQ C, 20.8% for RAQ I and 32.3% for RAO II, values that 
are lower than the ones on the BVB.  
 
 
                     Table no. 3 
The evolution of the first stock exchange indexes  
Indicator   June 2007  December 
2007 
June 2008  July 2008  August 2008 
1359.26 
mil.RON 
1270.03 mil 
RON 
658.95 mil 
RON 
624.78 mil 
RON 
458.94 
mil.RON 
564.35 mil 
USD 
524.72 mil 
USD 
281.09 mil 
USD 
275.47 mil 
USD 
195.17 mil 
USD 
The total 
transactional 
value (stocks, 
obligations)   420.99 mil 
EUR 
360.75 mil 
EUR 
180.38 mil 
EUR 
174.48 mil 
EUR 
130.15 mil 
EUR 
The number of 
transactional 
titles  
927.48 mil  649.11 mil  1282223.13 
mil 
1113143.68 
mil 
1220589185 
mil 
The number of 
transactions  
124389 105011 108166  121913  86752   301
87980.02 mil 
RON 
85962.39 mil 
RON 
110449 mil 
RON 
109204.0 mil 
RON 
103462.18 
mil RON 
37847.38 mil 
USD 
35326.04 mil 
USD 
47884.18 mil 
USD 
48226.47 mil 
USD 
43159.60 mil 
USD 
Stock 
exchange 
capitalization  
28072.76 mil 
EUR 
24600.75 mil 
EUR 
30280.92 mil 
EUR 
38878.25 mil 
EUR 
29284.51  mil 
EUR 
From the data in the table above what results is that the total transactional value was 51.5% 
lower in June 2008 than in June 2007, 54% lower in July 2008 than in June 2007 and 66.6% lower 
in August 2008 than in June 2007.  Consequently, from the data mentioned above what results is a 
first uncorrelation in BVB, namely the decrease of the stock exchange indexes much faster than the 
decrease for international stock exchange.  
The main causes that determined this decrease, sometimes dramatic for BVB, were mainly 
as it follows: 
-  The massive withdrawal of the foreign investors;  
-  The permanent political fights phenomenon;  
-  The international political and economic conjuncture;  
-  The lack of support of the government, BNR, political people, etc. responsible factors 
for the economic stability phenomenon in Romania during the decrease of the stock 
exchange indexes in BVB;  
-  The shares buyback phenomenon decreased in BVB; we mention that only a few 
societies chose this form of protecting their own share rates (Armax, Medias, Bank 
Transilvania). 
In order to illustrate the influence of the foreign investors in BVB, we mention that in June 
2008, the non-residents invested in the Romanian capital market only 101.15 million lei (27.67 
million EUR), five times lower than in May 2008, when the foreign investors placed in the stock 
exchange509.04 million lei (139.1 million EUR), and in the first six months of the year, the 
nonresidents bought securities from the stock exchange of 1471.85 million lei and sold securities of 
1499.68 million lei
2. The second uncorrelation that we notice is the gap between the economic 
growth in Romania, foreseen for 2008 to reach 8-8.5% and 8.8%
3 for the first semester and the 
unprecedented decrease of the stock exchange indexes on BVB; the Romanian Stock exchange was 
not reflected in this matter, the high increase in economy being influenced more by the external 
factors. From the data we have what results is that the main stock exchange indexes in our country 
registered depreciations of over 36%
4 until 12.08.2008 up to the levels registered three years ago.  
The third uncorrelation that we notice both on the main market and on the secondary one is 
the large gap between the high economic results in some cases of the listed commercial societies 
and the evolution of the rates of stocks in the analyzed period (the end of August 2008).  
The profit of the non-financial companies in the 1st semester 2008 increased with 60%
5. 
Thus, we mention a few societies: Bank Transilvania, Petrom, Turism Felix S.A: Oradea, 
Turbomecanica Bucharest, Albalact Alba Iulia, Armex Gaz Medias, Zentiva Bucharest. 
Thus, the ‘Zentiva’ Bucharest securities (the SCD symbol) decreased with 52.69% in the 
analyzed period of this year, even if it got a net profit of 22.02 million lei during the first six months 
of 2008, 72.72% higher than the one afferent to the first semester in 2007.  
The Tourism Felix S.A. Băile Felix titles also decreased from 12000 lei (stock in 10.08.2007 
to 6000 lei/stock in July 2008, even if the exploitation incomes increased with 135 for this company 
in the first semester of 2008. 
                                                 
2 Ana Săbiescu, Investitorii străini nu se înghesuie pe Bursă, the Bursa journal issue 171 (3784) 02.09.2008, p.3. 
3 Andreea Arăboaie, Inflaţia şi deficitul de cont curent, efectuate de creşterea economică, Bursa, issue 168 (3781), 
28.08.2008, p.1. 
4 Ana Săbiescu, Indicii bursieri au ajuns la valorile de acum trei ani, Bursa issue 167 (3780), 27.08.2008. 
5 BVB press conference of 04.09.2008 on The Money Channel   302
There are also a lot of societies, very few though, such as ‘Socep’ Constanţa, where the 
quotation has increased with almost 45% since the beginning of the year, connected to 61% increase 
of the business figure for the first six months in 2008, and ‘Argus’ Constanţa titles were appreciated 
with 55% connected with a part of the net profit of over 23% in the first semester in 2008.  
The developed countries are looking for measures this year in order to counteract the world 
financial crisis. We mention in this case the decision of the United States of America Congress for 
slowing down the building crisis of starting a fund of 300 billion dollars for helping the owners 
affected by the mortgage crisis. At the same time, the law also stipulates financial support for the 
credit companies Fannie Mae and Freddie Mac, which have or guarantee almost half of the USA 
mortgage around 12000 billion dollars
6. In Romania, the interest on monetary politics could get to 
10.5% by the end of the year, according to the specialists, the interest that competes with the ‘gain’ 
achieved because of the Stock exchange.   
Regarding the perspective of 2008, we mention that on 16.09.2008 in Romania, the BET 
index decreased with 7.1%, having 4480.68 points, the BET-FI index decreasing with no more than 
8.98%, having 27481.61 points, decrease due to the bankruptcy of the ‘Lehman Brothers’ American 
Bank and to the lack of cash at American International Group Inc. (AIG) Insurance Company. In 
order to normalize the stock exchange indexes, the governments in the developed countries had 
massive liquidity infusions; we mention that FED credited the AIG insurance company with 85.0 
billion $.   
 
References: 
1.  Gabriela Anghelache, Piaţa de capital, the Economic Publishing House, 2004 
2.  Teodor Hada, Plasamente bursiere în România, Risoprint Publishing, Cluj-Napoca, 2006 
3.  The Bursa journal 2006, 2007, 2008 
4.  The Bucharest Stock exchange, Monthly newsletter, June 2007, December 2007, June 2008, 
July 2008, August 2008 
5.  The Bucharest Stock exchange, Monthly newsletter, June 2007, December 2007, June 2008, 
July 2008, August 2008 
6.  www.bvb.ro  
7.  www.money.cnn.com 
                                                 
6 http://www.gandul.info/economia.09.02.2008 

UNCORRELATIONS IN THE VALUE STOCK EXCHANGE IN BUCHAREST

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