JUNE 2013 - FEAS

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FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2013 MONTENEGRO STOCK EXCHANGE CAPITAL MARKET DEVELOPMENT AND ECONOMIC OUTLOOK After record revenues, number of concluded transactions and the amount of market capitalization, the Montenegrin capital market, in the period after the investment boom from 2007, shows negative trends in terms of the market liquidity. That the market is subject to a period of stagnation and high reluctance of investors can also be concluded by observing the movement of the index in the last three years. The main factor that led to significantly worse results is the poor macroeconomic situation, both in Montenegro and beyond, leaving effects, primarily in terms of less money available for investment in the retail sector and among institutional investors. In addition, the Montenegrin capital market should still be seen as an “emerging market”, usually seen as risky, which leads to avoidance in the times of recession, due to the reluctance of investors seeking safe yields. According to credit agencies’ estimates, Montenegro currently has the following credit ratings: • Ba3 (with stable outlook) - by credit agency Moody’s (confirmed in May 2012). • BB- (with stable outlook) - by credit agency Standard and Poor’s confirmed in June 2012). Bad macroeconomic situation in Montenegro is caused largely by external economic factors and the influence of global economic crisis. The main characteristics of the current macroeconomic situation in Montenegro are: slowing economic growth (expressed by a significant drop in GDP) and increase in the level of tax and other debts in the economy, resulting in a significant increase in the level of government debt in relation to the GDP level. The current macroeconomic situation is also characterized by stagnation in credit activities of the banking sector which is directly caused by large amounts of bad loans (approved primarily in the period of investment boom). Incentives for improving the macroeconomic environment and the overall situation can be expected with the completion of announced major infrastructure projects in the sector of providing services. The start of official negotiations on accession to the European Union presents a significant step in terms of achieving macroeconomic stability (through the provision of better sources of financing and the government’s debt consolidation) and through the harmonization and implementation of European legislation, which is a significant argument in the process of attracting foreign investors and fostering further growth through the realization of foreign direct investments. The real growth rate of GDP in the first quarter of 2012 compared with the same period in 2011 was negative, i.e. it amounted -2.4%, while the second quarter indicates the real growth rate 0.3%. (Source: Central Bank of Montenegro, Ministry of Finance of Montenegro, Statistical Office of Montenegro - Monstat) According to the report “Economic Freedom of the World” published by the Heritage Foundation and the Wall Street Journal, Montenegro’s economic freedom score is 62.6, making its economy the 70th freest in the 2013 index. Its score is essentially the same as last year, with notable gains in the control of public spending, business freedom, and freedom from corruption balanced by declines in labor freedom, monetary freedom, and trade freedom. Montenegro ranks 33rd out of 43 countries in the Europe region, and its overall score is above the world average. Key Information Contacts Securities Commission of Montenegro www.scmn.me Central Depository Agency www.cda.me Central Bank of Montenegro www.cb-mn.org Ministry of Finance www.mf.gov.me Montenegro Statistical Office www.monstat.org CONTACT INFORMATION Contact Name Ms. Suzana Drincic E-mail info@mnse.me Website www.mnse.me PAGE 70
FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2013 MUSCAT SECURITIES MARKET Ahmed Saleh Al-Marhoon Director General We are continuously working on developing and operating an efficient and transparent securities market to the best standard expected by our local and foreign investors. We are continuously working on developing and operating an efficient and transparent securities market to the best standard expected by our local and foreign investors. We believe that exchanges that adhere to good governance, greater transparency and greater accountability, are able to foster investors’ confidence as well as creating attractive investment environment. The Omani economy has managed to move forward to achieving self-growth and being adaptable to regional and global economic fluctuations. We at Muscat Securities Market (MSM), have devised a comprehensive road map that enables us to build capacity and promote sustainable capital market development strategy specifically aimed at improving access to the regional and international capital markets. The year 2013 witnessed, for the first time in Oman, listing of Islamic products. In effect Islamic financial indices have been launched for Sukuk and Exchange Traded Islamic Funds (ETIT’s). The launching of such indices would contribute to attracting investors who prefer a credible reference for identification of Shariaa complaint instruments. MSM DEVELOPMENT Muscat Securities Market has implemented a number of projects related to the development of the market. In the area of information security and protection, MSM applies the best international practices in information technology, especially those related to customer information security. In this respect the MSM has obtained the international ISO 27001 in the area of information security. The MSM launched, during the current month, the latest NYSE Technologies version V.90 of the trading system and other related systems. All brokerage companies are now connected with the trading system via modern and advanced network using state-of-the-art MPLS technology (Multiprotocol Label Switching). Regarding MSM Index, the market has introduced a change in the sectors forming the price index. The Banking and Investment Companies Sector was renamed to the Financial Sector. Services and Insurance Sector became the Services Sector and the Industry Sector remained unchanged. This new amendments resulted in a reclassification of some companies in the new sectors based on their main activity. Moreover, the number of companies forming MSM sectoral indices increased to 15 instead of 10 companies. The Market continued to implement several media and awareness programmes in the Sultanate and abroad. The MSM in cooperation with the Ministry of Education organized workshops for applied mathematics teachers all over the Sultanate. On training, Muscat Securities Market has signed a cooperation agreement with Bombay Stock Exchange Training Institute to deliver training programmes in the securities and capital markets fields in the Sultanate. Regarding information dissemination, Muscat Securities Market has signed an agreement with an international company to develop and update MSM website in form and content in order to keep pace with the international technical developments in the field of information. MSM has managed, through newly introduced program in its website, to provide software for the financial performance of the listed companies. It is an advanced electronic programme on basic and financial analysis of joint stock companies` statement. Secured Financing Account Directives, with serious restrictions, have been issued last year allowing margin trading operations at our stock exchange. FUTURE OUTLOOK • Activating the Primary Market for new issues. • Diversification of our investment tools. The MSM is now in the process of listing Exchange Traded Funds (ETFs) and Islamic instruments. • Improving our technological systems to cope the development in the trading, clearance and settlement operations. • Transformation of family enterprises into public joint stock companies. • Increasing investment funds which are specialized in dealing on securities. • Attracting foreign investments. • Introducing market makers. For achieving these goals the MSM is dedicating more effort to improve its legal environment working mechanisms, disclosure, transparency, listing, and keeping up to date with the latest international developments. PAGE 71
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JUNE 2013 - FEAS

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