JUNE 2013 - FEAS

FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2013MONTENEGRO STOCK EXCHANGEContinuous development of our market isthe basis of the future of the MSE.Mr. Gojko MaksimovicActing CEOThe negative trends in Montenegrin capitalmarket continued into 2012. Compared to2011, around 43% lower turnover is generated,and similar situation is with the total amount oftransactions concluded. As the main factor for thenegative results achieved, there is currently poormacroeconomic situation, both in Montenegroand beyond, which left the effects primarly onless money available for investments, both in theretail and in the institutional sectors. In addition,the Montenegrin capital market should continueto be seen as an emerging market that is usuallylabeled as a risky, which results in avoiding duringmoments of recession, due to the reluctance ofinvestors and their seeking for the secure returns.As a consequence of such a bad environment,compared to the beginning of the year MontenegroStock Exchange has six members less (brokeragefirms). During the observed period, there wasa growth of companies’ index MONEX20 foraproximatelly 3%. In the case of companies’ index,if we take into consideration the dividends paid bythe companies that constitute the mentioned index,the realized profit would be 7.05%. It should benoted that compared to the previous years therewas a considerable improvement of the marketregulations by the implementation of new legalregulations of the Montenegro Stock Exchange,which led to an increase in the level of companies’transparency. Furthermore, major improvementof technical infrastructure has enabled usto introduce the online trading system byimplementing the new software - BrokerOffice. Wehave to emphasize that during this year we haveachieved good results in terms of communicationwith the Government of Montenegro that resultedin issuance of government bonds. Successfullycompleted emission represents a major stepahead for our capital market, as we have provedthat we are becoming a place for successfulcapital raising.HISTORY AND DEVELOPMENTMontenegro Stock Exchange was established inJune 1993, pursuant to the Law on Money and theCapital Market. The first shareholders of the StockExchange were the Republic of Montenegro andfour banks from Montenegro:• Montenegrobanka A.D. Podgorica;• Pljevaljska banka A.D. Pljevlja;• Beranska banka A.D. Berane;• Hipotekarna banka A.D. Podgorica.After taking authority from Federal Commission ofYugoslavia for the Securities and Financial Markets,in December 2000, the Commission for Securitiesof the Republic of Montenegro, has given, afterdetermining the fulfillment of all the necessarypreconditions, the Montenegro Stock Exchangea business license. On 20 September 2001, sixMontenegrin financial institutions and BrokersBusiness Association founded the New SecuritiesExchange of Montenegro. Montenegro StockExchange completed the final harmonization withthe Law on Securities Montenegro in 2004, whichled to a situation in which, until the end of 2010,there were two stock exchanges operating. Thestart of operations of the New Securities Exchangeof Montenegro is significant because for the firsttime in Montenegro capital market transaction wereexecuting by electronic trading system.In the beginning of 2011, the two Montenegrinstock exchanges were integrated, throughthe merge of the New Securities Exchange ofMontenegro to the Montenegro Stock Exchange.The first working day on the single MontenegroStock Exchange was 10 of January 2011. Atthis moment, Montenegro Stock Exchange has13 members. In overall shareholder structureof the Montenegro Stock Exchange 12 financialinstitutions from Montenegro participate withapproximately of 93% ownership.FUTURE OUTLOOKIt aims to Current situation in the capital marketstimulated our greater activity in the field ofpermanent services improvement that we offeredas the best way to confront crisis. The followingyears will be very challenging for us. We will tryto make a greater impact in order to increase thenumber of financial instruments on MontenegroStock Exchange through more active role ofthe Government, primarily in terms of rising thenumber and volume of bonds emission, andby implementation as well as the introductionof treasury bills trading. This will be possible byfurther transformation of certain governmental andpublic enterprises into joint stock companies andby introducing the sale of a part of the capital byinitial public offering (IPO). In addition, we expectto increase the number of financial instrumentsthrough the affirmation of private companies(which have high amounts of annual revenues)established as a limited liability companies, to theirtransformation into joint stock companies. In thisway, the Montenegro Stock Exchange would getits full role as a place of raising capital throughthe formation of joint stock companies and alsowould become available for the small and mediumenterprises, which their dissatisfaction towardsthe expensive loans of commercial banks inMontenegro are expressing for a longer time. Thebig challenge for our capital market is the processof Montenegro’s accession to the EU. Accordingly,we will shortly have the changes of capitalmarket regulations and its harmonization with theEuropean legislation (MiFID regulation). We hopethat mentioned implementation of the Europeanlaws will bring positive effects to our market. As ourmain task we have to solve the problem of liquidityin the market through creation of mechanisms of“borrowing” shares (primarily pledged) and byintroduction of market-makers. Another key taskwill involve improvements in regional cooperationwith other stock exchanges by means of possibilityof creating a common trading platform and on thisbasis, at least the formation of “virtual” joint capitalmarket.PAGE 69