- Political stability
- Fiscal affairs
- Monetary policy
- Regulated markets
- Privatisation
- Macroeconomic developments
submited on 23.02.2011 in category Regulated markets | Monetary policy | Macroeconomic developments
А number of measures, including the sale of the Bulgarian Stock Exchange to a strategic foreign investor, which could attract more foreign institutional investors, have been publicly discussed in the recent months. From this perspective, it is useful to examine the state and dynamics of the Bulgarian stock market in relative terms. Moreover, most European economies have already emerged from the recession in the technical sense of this term.
Along with the global financial crisis, the stock market in Europe has been affected by the sovereign debt crisis, which in one way or another affected Greece and Ireland (directly), Spain and Portugal (indirectly), and most other European economies mainly through the rising cost of funding. Risk of liquidity problems of some of the so called peripheral economies is one reason why the European Central Bank continues to hold the repo rate at historically low levels, which partly contributes to the growth of nominal stock prices of developed European regulated markets.
One of the indicators that can be used to assess the state of the capital market in Europe is the ratio of stock market capitalization to GDP of the corresponding country. This indicator is shown on the horizontal axis, while on the vertical axis is the market capitalization contraction relative to the highest values reached in 2007 (Please see chart). The larger the corresponding bubble on the chart, the greater the size of the capital market in relative terms (relative to GDP).
It turns out that Romania and Bulgaria have experienced a similar market capitalization decline - about 63% from the peak values. Larger decline currently have registered the immediately affected by the sovereign crisis Greece and Ireland, which are better developed capital markets compared to the Bulgarian. Among the Central European countries smallest decrease was recorded by Slovakia, which received additional stimulus from joining the Eurozone, and Poland, which managed to avoid the recession.
The capital market in Spain so far does not seem to be disproportionately hit by the crisis, despite speculation about a possible crisis in government financing, the real estate bubble burst and the highest unemployment rate in EU according to official data. The most highly developed capital markets - the United States and the United Kingdom - are also among the least affected in the developed world, not so much because of rapid economic growth, but rather as a function of the stimuli, fueled by soft monetary and expansionary fiscal policy so far.