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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2005
MACEDONIAN STOCK EXCHANGE
Ivan Steriev
Chief Executive Director
The first half of 2005 was very successful for
the Macedonian Stock Exchange. Total
turnover almost doubled compared with the
same period of 2004. Trading in equities and
bonds was higher than the first half of 2004
(equities were 342.15% higher and bonds,
41.69% higher).
The stable inflation rate and fixed foreign
exchange rate of the Euro, with further
financial and fiscal stabilization created
needed conditions for sustainable economic
growth in the next few years.
HISTORY AND DEVELOPMENT
The Macedonian Stock Exchange was
founded on September 13, 1995 and
commenced trading on March 28, 1996, as
a central marketplace for trading in
securities and the first organized stock
exchange in the history of the Republic of
Macedonia.
The MSE was founded as a not-for-profit
joint stock company with founding capital of
500,000 Euros. According to the legislation
that was in force in 1996 the only possible
eligible founders of the MSE were banks
and other financial institutions (saving
houses and insurance companies) MSE
initially had 19 members: 13 banks, 3 saving
houses and 3 insurance companies. Since
1997, according to the new Law on
Issuance and Trading in Securities, MSE
members must be legal entities whose sole
activity is trading in securities (brokerage
houses). Due to these changes the number
of MSE members decreased to 7.
The new Securities Law from 2000
introduced again the possibility of banks
being MSE members (starting from 2002).
All MSE members must be licensed for
trading in securities by the Macedonian
Security and Exchange Commission. Only
brokers, authorized by the MSE members
may trade in securities at MSE (in
Macedonia there are 253 brokers).
MSE currently has 14 members - 8
brokerage houses and 6 banks. According
to the Securities Law from 2000 the initial
share capital of each MSE member must be
at least 75,000 Euros (license for acting as
an agent) and the liquid capital must be
15,000 Euros. In order to get full license as
broker-dealer, a brokerage company must
have at least 500,000 Euro share in capital.
PAGE 100
The first half of 2005 was very successful
for the Macedonian Stock Exchange. Total
turnover almost doubled compared with the
same period of 2004.
The main features of the Macedonian Stock
Exchange operations in the first half of 2005
are as follows:
• 57 listed companies with market
capitalization of approximately 434.5 million
Euros, showing an increase of 53.83% as
compared with the first half of 2004;
• significantly higher volume of trading in
shares (turnover of the shares was 342.15%
higher than in the first half of 2004);
• 25 residual government shares were
traded, with the turnover of 6.6 million
Euros;
• The new MBI-10 index, introduced at the
beginning of 2005, increased 83.43%
reaching a level of 1,834.28.
Starting from June 20, 2001 (with the new
amendments of the Securities Law), MSE
started to operate on a for-profit basis, with
a founding capital of 500.000 Euros. MSE
shareholders may be any legal and private
domestic and foreign entity. Shareholdings
per entity is limited up to 10% of the MSE
outstanding shares.
Currently MSE has 20 shareholders
(8 brokerage houses, 8 banks, 1 insurance
company and 3 private investors).
FUTURE OUTLOOK
After the expiration of the mandatory listing
(as of end of 2004) the number of listed
companies at the MSE has decreased to 57
companies. However, the remaining listed
companies are those Macedonian
corporations which have real market
potential and trading activity in their shares
is expected to grow.
The level of disclosure and corporate
governance are planned to be strengthened
simultaneously with the revision of the MSE
Listing Rules and the development of the
MSE Code of Corporate Governance (with
technical assistance of the USAID Corporate
Governance and Company Law Project and
the Dutch Ministry of Finance).
Dissemination of the data related with the
listed companies is planned to be
reorganized by introducing a software
application (Internet based) that will be used
by the issuers for their public disclosure
purposes.
The participation of foreign portfolio
investors in the Macedonian securities
market should further increase due to
better transparency achieved during the
mandatory listing period and favorable
MSE has made changes in its trading
system in order to boost trading in some of
the illiquid stocks–modifying its current call
market system for these securities with the
aim of increasing the size and transparency
of its public order book.
MSE has continued its activities in the field of
international co-operation, both in the region
of South-Eastern Europe and wider. We
would like to stress that in the first half of
2005 MSE has become a member of FESE.
financial ratios of some of the Macedonian
companies compared with their peers in the
region. Nevertheless, this development will
be directly correlated with the political
stability in the region.
After obtaining the first credit rating from
S&P in July 2004 (BB with positive outlook),
the Macedonian Government announced
that it will start with the issuance of new
government bonds in 2005 (it is likely that
the first bonds issued will be with a 1 year
maturity), which should contribute to a
further increase in the trading activity in debt
instruments at MSE as well.
Two newly founded private pension funds
within the mandatory second pillar of the
reformed pension system in the Republic of
Macedonia will start their operations in the
second half of 2005, creating the first
institutional investors on the market. The
amounts collected from the pension fund’s
members in one part should be invested in
the the secondary securities market,
especially in debt instrument traded at the
MSE. A demonstration effect is also
expected i.e. the creation of the first
classical investment funds could be a
favorable outcome for the further
development of the Macedonian securities
market.
Pension reforms will contribute to the
development of one of the missing elements
of the Macedonian securities market – the
setting up of custody operations with major
Macedonian banks. This will facilitate further
foreign portfolio investments in the country.
MSE should continue its international cooperation
arrangements, maintaining already
established informational network SEM-
ON.NET (with exchanges from Ljubljana,
Varazdin, Sarajevo, Banja Luka, Belgrade
and Podgorica).