June 10, 2020 / 3:44 PM / a month ago

Romanian lawmakers vote to postpone IPOs of state firms by two years

BUCHAREST (Reuters) - Romanian lawmakers on Wednesday passed a bill postponing any plans to list or privatise state-owned companies by two years, a move that analysts and investors said would stunt capital markets and isolate the economy.

The bill, initiated by the Social Democrats - parliament’s biggest party - to protect national interests comes as the economy struggles to regain its footing after a two-month lockdown to prevent the spread of the new coronavirus.

However, it is not certain to become law. Prime Minister Ludovic Orban, who leads a centrist minority government, said the bill was an aberration and that his Liberal Party would challenge it in the Constitutional Court.

If the challenge fails, the president could still send the bill back to parliament for re-examination before signing it.

With a stock market capitalisation at 9.5% of gross domestic product in 2019, the Bucharest Stock Exchange ranks among the smallest in central and eastern Europe and badly needs liquidity, as do private pension funds, some of Romania’s largest institutional investors.

Postponing the sales of stakes in state companies could hurt the bourse just as it gears up for an FTSE Russell upgrade from “frontier” to “emerging” market.

A planned initial public offering of a minority stake in Hidroelectrica, Romania’s largest power producer, would also suffer.

Before a postponement due to the coronavirus outbreak, the company had aimed to list up to 20% of its shares.

The investment fund Fondul Proprietatea, which holds minority stakes in state-owned transport and energy firms including Hidroelectrica, and could gain from potential listings, said the bill would “seriously jeopardise Romania’s economic recovery by obstructing the development of the capital market and discouraging potential investments”.

“Listings also play a critical role in Romania’s potential upgrade to Emerging Market status, which risks being postponed indefinitely and means Romania would be sabotaging its own objective,” the fund said in a statement.

The banking and financial analysts’ industry associations also criticised the bill.

Reporting by Luiza Ilie; Editing by Kevin Liffey

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