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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT APRIL 2007 MOLDOVAN STOCK EXCHANGE Dr. Corneliu DODU President 2006 was a year full of events and changes for the Moldavian capital market, which were a result of the EU integration for Moldova. 2006 was a year full of events and changes for the Moldavian capital market, which were a result of the EU integration for Moldova. A new entity called a Megaregulator will be created. The Megaregulator’s function is to oversee the financial non-banking sector of the economy, which also includes insurance companies. During 2006 projects concerning basic laws in the securities market were passed, projects in accounting and audit laws, and so on. Modernization of the legislation is implemented in accordance with the directive requirements of the EU standards. The calculation and structure of the CNVM index of the Stock Market, was developed by the National Securities Committee, and was changed at the end of 2006. In 2006 listing requirements and trading rules concerning direct transactions were changed. Further, new rules concerning commissions used by the Exchange were implemented and new procedures concerning auction realization were introduced. In the context of international cooperation, a memorandum of understanding between the Moldavian Stock Exchange (MSE) and the Bucharest Stock Exchange was signed. Also in plans is the signing of similar MoU with few more exchanges. In 2006, turnover grew to US$ 26.58 million, which exceeded the amount in 2005 by 59.73%. During 2006 1,845 transactions were concluded with securities from 265 issuers. Investors showed their interest primarily in commercial bank stocks. Transactions with commercial bank securities have comprised 37% of the total turnover for the year. The largest transactions of the year were: the transactions involving securities of Moldova-Agroindbank, the leading commercial bank in Moldova, with US$ 9.41 million and that of Ciment, a cement plant, with US$ 5.18 million. As before, the main players in the securities market, the investment funds are missing. All of them are at the current time in a process of reorganization or liquidation. Active trading at the stock market at its lowest. It is expected that changes in legislation will lead to the growth of the securities market, because it is planned that all transactions concerning corporate securities will be carried out only at the Exchange. HISTORY AND DEVELOPMENT In December 1994, the MSE, a closed company, was established under the law on Securities Circulation and Stock Exchanges. Originally, 34 securities market professionals participated in trading. The first transactions were held on 26 June1995, which is considered the date of the founding of the MSE. Due to the assistance of the USAID, the Exchange was equipped with advanced technology for stock auctions. In 1998 the MSE established the National Securities Depository (NSD), a non-commercial jointstock company. At the initial stage of the MSE's development, the authorized capital adequacy standards were set as an authorized capital of US$ 18,030 (238,000 lei). In 1998 capital adequacy increased from US$ 29,697 (392,000 lei) and is now US$ 37,879 (500,000 lei). The equity capital sufficiency norms of US$ 75,758 (1.0 million lei), and guaranty fund adequacy norms of 30% of the authorized capital as set by the legislation are currently in practice. In April 2000, the MSE received the status of a self-regulating non-commercial organization. At the beginning of 2002, the National Commission introduced the CNVM-32 index. The world famous index, the Dow Jones Index, serves as a basis for the calculation of the CNVM-32. In June 2005, the MSE celebrated its 10th anniversary. At the end of 2006 methodology of calculation CNVM-32 Index was changed, regarding number of issuers included in index calculation, diminishing from 32 companies to 24. But the changes that have taken place, have had a positive effect on the activities of all participants of the stock market, including the Exchange itself. Rules of the MSE were renewed with new listing requirements for the companies this spring. There were three listing levels and non-listing section before, now there are only two plus non-listing. Also, new projects of base securities market laws in accordance with European Standards were introduced to the community. FUTURE OUTLOOK 2007 will be a very significant year for Moldova’s capital market. We are sure that our securities market will take a big step forward because of the following aspects: In an effort to expand cooperation with world stock exchanges, on 2 November 2006 a memorandum of understanding was signed between the MSE and the Bucharest Stock Exchange. In accordance with our schedule we are planning to sign an MoU with 5 more exchanges. Our legislation concerning the capital market will be changed. Law on Joint Stock Companies and Law on Securities Market will be revised in conformity with European Standards. The National Securities Committee will soon be transformed to a new regulative body, as it is called now–a Megaregulator. This organization will control and supervise the non-banking financial sector, including the securities market, the insurance services market, and the minor savings-loan giving associations. PAGE 100
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT APRIL 2007 MOLDOVAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ millions # Shares millions Total Volume Average Daily Volume Total Volume Average Daily Volume Stocks Jul-06 0.31 0.01 0.65 0.031 Aug-06 0.55 0.03 2.30 0.10 Sep-06 0.87 0.04 4.34 0.21 Oct-06 1.87 0.09 1.19 0.05 Nov-06 1.21 0.05 1.40 0.06 Dec-06 1.35 0.06 1.73 0.08 TOTAL 6.16 0.05 11.61 0.09 Bonds Jul-06 0.0 0.0 0.0 0.0 Aug-06 0.0 0.0 0.0 0.0 Sep-06 0.0 0.0 0.0 0.0 Oct-06 0.0 0.0 0.0 0.0 Nov-06 0.0 0.0 0.0 0.0 Dec-06 0.0 0.0 0.0 0.0 TOTAL 0.0 0.0 0.0 0.0 Other Jul-06 0.0 0.0 0.0 0.0 Aug-06 0.0 0.0 0.0 0.0 Sep-06 0.0 0.0 0.0 0.0 Oct-06 0.0 0.0 0.0 0.0 Nov-06 0.0 0.0 0.0 0.0 Dec-06 0.0 0.0 0.0 0.0 TOTAL 0.0 0.0 0.0 0.0 Market Capitalization* (US$ millions) Index MONTHLY STOCK VOLUME (US$ millions) 5-YEAR STOCK VOLUME (US$ millions) Jul-06 0.0 n/a Aug-06 0.0 n/a Sep-06 0.0 n/a Oct-06 0.0 n/a Nov-06 0.0 n/a Dec-06 0.0 n/a * MSE recalculated its market cap. Data is not available 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 60 50 40 30 20 10 0 2002 2003 2004 2005 2006 CONTACT INFORMATION Contact Name Mr. Serghei Istrate E-mail serghei.moldse@gmail.com Website www.moldse.md PAGE 101
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