Thursday, January 8, 2009

Romanian Stocks Plummet as Suspended Bank Trades, Gas Halted

By Pawel Kozlowski and Adam Brown

Jan. 7 (Bloomberg) -- Romania’s benchmark stock index plunged as Banca Transilvania SA, the country’s second-biggest publicly traded bank, resumed trading and caught up with three months of market declines, and Russia cut gas shipments.

Banca Transilvania, slumped a record 58 percent, or by 1.52 leu to 1.10 after a suspension to allow a so-called reverse share split. The BET Index tumbled 384.24, or 12 percent, to 2,741.46 at 5:29 p.m. in Bucharest, the most since August 2000, weighed down by Banca Transilvania, which accounts for 61 percent of the index. State-owned gas distributor Transgaz fell from a one-month high as Russia’s OAO Gazprom stopped gas supplies to Europe.

“Banca Transilvania’s drop was expected because the stock was suspended while all other banks were going down,” Florin Irimin, a Bucharest-based trader at Intercapital Invest SA, said by phone. “All the news about Gazprom will definitely affect Transgaz’s business because the company will lose transit fees.”

The BET Index slid 46 percent since Banca Transilvania’s suspension started in September, and lost 70 percent last year as investors shunned higher-yielding emerging-market assets because of global financial turmoil and a spreading economic slowdown. Russian natural-gas exports through Ukraine to Europe halted for the first time in three years today, threatening to create shortages in Poland, Hungary, the Czech Republic, and Slovakia while prompting Romania to close its second natural-gas import station.

Transgaz retreated 4.2 leu, or 3.4 percent, to 120.5 after Romania closed the gas-import station and decided to tap reserves to meet demand.

BRD-Groupe Societe Generale, Romania’s biggest lender by market value, lost 0.3 leu, or 3.5 percent, to 8.4 today. The stock retreated 47 percent since Sept. 12.

Gas Demand

Romania usually receives about 7.2 million cubic meters of gas a day, or 12 percent of its consumption, from Russia through the two entry points. The country can withdraw as much as 26 million cubic meters a day from storage, Economy Minister Adriean Videanu said yesterday. It consumes 61.5 million cubic meters a day and produces 33 million cubic meters.

The country has sufficient gas reserves to cover 80 days’ demand, Videanu said today.

After years of growing prosperity that drew investment from companies including Carrefour SA, Ikea, Starbucks Corp., Nokia Oyj, and Ford Motor Co., Romania’s economy is slowing as the global crisis spreads to emerging markets.

Standard & Poor’s and Fitch Ratings have downgraded Romania’s debt rating to junk in the past two months, citing increased government spending among other reasons. Fitch lowered Romania two notches to BB+ from BBB, while S&P cut its rating on the country to BB+ from BBB-.

The leu is at the weakest in almost four years after the global credit crisis that left banks with losses and writedowns totaling about $1 trillion prompted investors to pull money out of emerging markets. At the same time, private debt is rising by 50 percent a year, wages at a 20 percent clip, and the current- account deficit has reached 14 percent of gross domestic

To contact the reporter on this story: Pawel Kozlowski in Warsaw

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