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ROMANIA TRADES DEEP IN THE RED

Like many of the European markets that closed down today on a stronger Euro and the “reality” of disrupted-- or in some cases completely cut-off--gas lines from Russia, Romania took a very precipitous -12% nose dive on the day.

Today’s slide can be significantly attributed to Banca Transilvania, the country’s second-biggest publically traded bank that accounts for 61% of the index, which lost some 58% of its value, having resumed trading today after the bank’s stock was suspended. Additionally state-owned gas distributor Transgaz fell from a one-month high as Gazprom reduced supplies.

Romania’s market performance in Q4 ‘08 was quite stable. (See graph). From its low on October 27th, the Bucharest’s BET Index rose +18% as of trading yesterday. Q3 GDP growth in Romania stood impressively at 8.9%, the highest in Europe, riding years of growth that drew foreign investment.

Irrespective of today’s crisis in local credibility, we do not think that Romania can sustain 9% GDP growth in 2009. That said, as we look Eastern European countries like Romania, an important question we continue to ask ourselves internally is: could Eastern European growth decouple from that in Western Europe? Stay tuned…

Matt Hedrick
Analyst