EME Strategy: Romania joins FTSE’s EM from September 2020 – FAQs
On 26 September, the FTSE announced that Romania will join the Emerging Markets universe from September 2020. We see this news as positive for the local stock market as, with three stocks added to the FTSE EM All Cap index (Romgaz, Banca Transilvania and BRD), it could attract sizeable passive inflows (USD 148m, on our numbers, c.19 trading days on the Bucharest Stock Exchange) and increase investors’ interest in local equities. We note that, according to the FTSE’s estimates, based on data as of 28 June 2019, Romania’s weight in FTSE’s EM index would be 0.078% in the FTSE Emerging All Cap index, and 0.085% in the FTSE Emerging All World index. Even though the weights may seem low at first glance, we are of the opinion that funds that follow reclassification events will not, by definition, underweight Romania. We base this view on Romania appearing to have a low correlation with other EM markets; therefore, a tracking error may prove to be unacceptable. Moreover, based on our analysis of Kuwait’s reclassification, we believe that the major beneficiaries should be the largest companies, which could enjoy a strong performance three months before the reclassification. However, as we have received several questions from clients interested in other issues associated with the reclassification event, we have decided to present our answers.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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