ASPECTS REGARDING THE BEHAVIOR OF FINANCIAL INSTRUMENT INVESTORS IN ROMANIA Smaranda VANCEA, Dimitrie Cantemir University, Bodoni Sandor 3-5, Tîrgu Mureş, Mureş, România Ioana-Monica HORJA, Dimitrie Cantemir University, Bodoni Sandor 3-5, Tîrgu Mureş, Mureş, România Abstract: The present paper tries to bring into focus the model of the Romanian in the capital market.the information that we used and processed was collected from three important souces: literature review, official raports of BSE and Sibex, official reports of Central Depository and Financial Supervisory Authority. Generally, we can point out the great risk aversion that characterized the Romanian financial instrument. Keywords: capital market,, behavior INTRODUCTION No one can say that the Romanians would not be interested in investing. On the contrary, after 1989, many times, have shown an increased interest in Romania overflowing investment opportunities of the era, manifested by excessive optimism investment, tend to copy the behavior of other. [1] These investment behaviors followed a large range of strategies, from the pyramid scheme investment, Caritas Game started in Cluj-Napoca (Ponzzi Scheme), to seemingly profitable investment in banks deposits. From an economic perspective, Caritas was merely a fraud -Caritas purchased funds were not invested in profitable projects that could generate added value in any case. On the other hand, financially, there has been a process of redistribution of financial resources. There were who benefited from Caritas. Cluj-Napoca manifests a local inflation due to higher disposable incomes and generates, in that period, a number of 2, millionaires, resulting from the "game" [2]. They took advantage from the naivety of other depositors, who, as the media confirm, sold, including houses they lived in for the hope of easy and fast gain. Some issues can be highlighted here since creating similarities with some of the realities of the global financial crisis triggered in 27: (a) complete disinterest of in the use of resources invested. Regarding this aspect, in the financial instrument Caritas, were waiting to multiply the amounts invested on the grounds through the money purchased from other depositors. Although mathematically it was clear that the system will collapse at some point, in the best case, were betting on the recovery of the amount before that time. On the other hand, re-investing proceeds by many consistently refute this scenario for many cases. (b) Mental boundary existing between the real economy and financial investments: made to expect earnings, although its source in the real economy did not exist. This can be caused by the desire to speculate the naivety of other or their own naivety. (c) Control of investor disinterest. The loss suffered by at Caritas was limited to 8% of the amount originally invested, if the system should have respected its own rules. However, the Caritas did not have any Page 46
interest of monitoring the activity of the fund. Such phenomena are found in many cases triggering the financial crisis started in 27. Such questions related to how in Romania are value the investments judgments overlap with issues raised in other studies in the case of more developed capital markets. Thus, if the investor is traditionally defined as rational and characterized by risk aversion, Shiller (1984) highlights the crucial role of fashion in influencing the investment behavior: invest in the stock market during periods in which investing in them become fashionable. In this context, Poterba and Summers (1986) noted the persistence of volatility in the capital market, which also creates questions about possible efficient allocation of financial resources. [3] 1. PREVIOUSE STUDYS REGARDING THE ROMANIAN BEHAVIOR IN CAPITAL MARKET Regarding direct questioning on Romanian capital market, the approach is not new. Among studies addressing this phenomenon we could stress those built by Vasilescu and Vătui (24a, 24b, 24c), results based on the analysis of a questionnaire in March 23, a total of 74 bouth Romanian and foreign individuals, professions and different age categories. Another study with a relatively similar approach is made by a company specialized in the study of the capital market in Romania, Prognosis.ro - Capital Market Research this press release is given on 7 January 28. The survey was conducted online with a sample of 361 active on the Bucharest Stock Exchange. From the point of view of features that the both studies can mention: (i) most were between 26-35 years, (ii) in terms of studies, most were university graduates, (iii) almost a quarter of respondents had started to invest on BSE in the year before the release, confirming the lack of experience, as Vasilescu and Vătui notes (24a, 24b, 24c), over 6% of the total had an experience of three years, and only 1% of respondents were active before 2 (over 8 years experience). (iv) only 16% of were based primarily on broker advice when took a certain trading decision. Over 7% of respondents trading decisions were made mainly in their analysis of stock prices and financial results of the issuer. [4] 2. STATISTIC OF FINANCIAL INSTRUMENTS INVESTORS IN ROMANIAN CAPITAL MARKET In Romanian capital market there are available some financial instrument: stocks, bonds, derivatives, fund units. These instruments can be traded in two regulated markets, operate by BSE and Sibex, who organises spot, futures and options market. The Romanian known well the instruments traded mainly at BSE, rather than in Sibex market. A good explanation regarding these preferences is in conection with the stocks traded spot in BSE market.sibex are well known as derivatives market, rather than a spot market, in fact, Sibex spot market started recently, and have just one instrument available on trades. The source of these date are the official raports of BSE. [5] Table 1 BVB transactions on spot market (all instruments) year Value of transactions (mii RON) Number of transactions 213 (till October) 9.84.726,62 79.711 212 9.762.948,1 936.613 211 11.563.21,96 1.123.195 21 8.728.71,33 1.114.257 29 6.973.88,87 1.56.52 Page 47
28 8.818.26,3 1.719.31 27 18.962.33,66 2.22.388 2 15 1 value of transactions 5 27 28 29 21 211 212 213, oct Fig 1 In 212 at Sibex regulated market were performed 4,732,266 shares transactions, turnover is 72% lower than in 211. The total value traded of RON 5,387,46, it was 78% lower than last year. The only company listed on the spot market in 212 was SIBEX. In 211, at the same market were performed 16,779,926 shares transactions, turnover was about 5.5% higher than in 21. Instead the total turnover of RON 24,463,39, it was 3.8% lower than last year. As in 21, the only company listed on the spot market in 211 was SIBEX. Table 2 Sibex Spot Market year Value of transactions (RON) Number of transactions 212 5.387.46,6 4.732.266 211 24.653.45,9 16.779.926 21 25.434.529 Table 3 Sibex & BVB- derivative market year Sibex volume Sibex Monthly Average BSE volume BSE number of transactions 212 1.473.356 122.78 2.423 1.964 1,38% 211 1.626.574 135.547 54.337 3.3 3,34% 21 1.637.794 136.482 25.99 1.745 1,53% 29 2.483.287 26.94 15.613 57,63% 28 3.618.766 31.563 18.18 922,5% 27 3.49.293 29.857 64 41 26 4.268.71 355.725 - - %BSE vs Sibex volume Page 48
5 4 3 2 SIBEX BSE 1 26 27 28 29 21 211 212 Fig.2 In 212 were recorded 789 active customer accounts (having made at least one transaction) of which 148 new accounts, while 641 transactions and accounts recorded in the previous year. Note: the term "new customer" means: a customer who has made at least one transaction in 212 and no transaction in 211. Situation is shown in the Table 4. Volume of contracts No of Table 4 Sibex- 212 New in 212 211 % of total No of new % of total new No of % of total - 1 121 15,3% 31 2,9% 144 11% 11-1 259 32,8% 51 34,5% 367 28% 11-1 262 33,2% 43 29,1% 52 38,3% 11-5 13 13,1% 17 11,5% 197 15% 51-1 21 2,7% 2 1,4% 6 4,6% 11-2 18 2,3% 3 2,% 31 2,4% 21-5 2,3%,% 9,7% > 5 3,4% 1,7% 2,2% total 789 1% 148 1% 1312 1% Most active customers in Sibex derivatives market, both 212 and in 211, traded between 1 and 1, contracts. 15 1 5 number of clients number of new clients 211 212 Fig.2 Page 49
3. THE MODEL OF THE ROMANIAN INVESTORS IN FINANCIAL INSTRUMENTS The portrait of big is shaped carefully by stock brokers due to confidentiality that they need to keep about their customers. Great "spin" on the stock million, can influence the course of actions have between 3 and 5 years, are aggressive or conservative, aware of everything that happens on the stock market and what can influence. The behavior of the largest on the financial market in Romania often has significant influence on the evolution of capital markets. The amounts invested by big brokerage firms clients are millions of EURO, meaning tens of billions RON. "Great customers generally prefer the most liquid companies, because investing these large sums in traded companies involves less liquidity risk taking, meaning that when there are no counterparty sale for the entire amount, except possibly by a significant decrease price. Major in capital market are generally medium term investments, and thouse who follows of speculative operations are less. Speculation occur less, just in some certain market circumstances. Between big are included investment funds. The funds that operate as legal entities generally have a medium-term investment strategy and long well defined. Their portfolio structure aimed primarily shares with high liquidity and growth potential in the medium and long term. Profile individuals who operates the stock is almost the same. "The vast majority are business people involved in the private sector and who already have years of experience regarding stock investments. Their stock behavior differs from one case to another. Differentiation is made of the level of risk for each. Some are aggressive clients and they have preference for high volatility stocks, like SIF, but, more SSIF customers have an conservative behavior, who mainly invest in banking stocks. The vast majority of all are targeting medium and long term placements. Their investment horizon spans a period of at least 6-9 months. However, about 3% of their s portfolio is run speculative. 4. THE NEW PREFERENCES OF THE ROMANIAN INVESTORS IN FINANCIAL INSTRUMENTS Investor interest was different from one period to another, as the previous statistics proves. After the capital market exceeded the lowest level 28-29, there was reluctance from investments in shares because of the sharp decline in the past memory. It takes time for to re-enter the market, even if there are missed opportunities. This situation reflects the risk aversion of many who value much more capital protection. Mutual funds have attracted 17, new in the last five years, a record made despite the harsh conditions in the capital market. Mutual fund industry has now reached over 254,. After 28, new enter on Romanian capital market (average 33, per year). Mutual fund is the easiest investment tool and is considered the first step to enter in the capital market. Classified into several risk categories, depending on the investments they make, mutual funds have increased in recent years mainly due to risk aversion population and intensive sales made by banks. In recent years, banks have had pro mutual funds. The most of the new mutual funds do not have the behavior of active, as happens in mature capital markets. These are not concerned with the evolution of the investment fund nor does its performance compare with the returns of other funds. Most of them treat these investments as some bank deposits. Page 5
3 25 2 17. new 15 1 5 mutual fonds 28 29 21 211 212 213, oct Fig.4[6] CONCLUSIONS The low level of volume and value of transactions done in BSE and Sibex bring into focus the risk aversion of romanian financial instruments. They don t prefere to risk their s savings by trading in some risky and volatile instruments. It takes time for to re-enter the market, even if there are missed opportunities. This situation reflects the risk aversion of many who value much more capital protection. Mutual funds have attracted 17, new in the last five years. Some are aggressive clients and they have preference for high volatility stocks, like SIF, but, more SSIF customers have an conservative behavior, who mainly invest in banking stocks. The vast majority of all are targeting medium and long term placements. Because of this aproche, we can explain the low interes in derivativs, wich are financial instruments suitable for risk lover. But the Romanian financial, mainly, are not in tis cathegory. AUTHORS - Ioana Monica HORJA is Associate professor PhD at Dimitrie Cantemir University, Bodoni Sandor 3-5, Tîrgu Mureş, Mureş, România. - Smaranda VANCEA is Lecturer PhD at Dimitrie Cantemir University, Bodoni Sandor 3-5, Tîrgu Mureş, Mureş, România. REFERENCES [1] Dragota, V, Serbanescu, V., Cateva indicii privind comportamentul investitorilor pe piata de capital din Romania. Rezultatele unei anchete, in Economie teoretică şi aplicată Volumul XVII (21), No. 1(542), pp. 5-16 [2] Bălaşa, M.M., Jocurile de întrajutorare specularea economiei nădejdii (I), Săptămâna Financiară, http://www.sfin.ro/articol_14562/jocurile_de_intrajutorare_-_specularea_economiei_nadejdii_(i).html [3] Dragota, V, Serbanescu, V., Cateva indicii privind comportamentul investitorilor pe piata de capital din Romania. Rezultatele unei anchete, in Economie teoretică şi aplicată Volumul XVII (21), No. 1(542), pp. 5-16 [4] www.prognosis.ro Capital Market Research, 28. [5]http://bvb.ro/TradingAndStatistics/GeneralStatistics.aspx?tab=5&m= http://bvb.ro/tradingandstatistics/generalstatistics.aspx [6] http://www.zf.ro/burse-fonduri-mutuale/peste-33--de-romani-devin-anual-investitori-in-fonduri-mutualedar-majoritatea-le-privesc-ca-pe-depozite-bancare-11278798/poze Page 51