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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005
BANJA LUKA STOCK EXCHANGE
Milan Bozic
CEO
2004 was a year of significant improvement
in the Banja Luka Stock Exchange (BLSE)
market performance. BLSE obtained an
important role in the transitional processes in
Bosnia and Herzegovina. The most important
results are related to an increase in turnover,
which amounted to US$ 65.3 million,
showing an increase of 50% in comparison
with 2003. During 86 trading days in 2004
there were over 80,000 transactions
concluded, which is 300% more than in
2003. Significant progress was also made in
regard to the structure of turnover. More than
45% of total turnover was achieved on the
official market, which is a consequence of
admitting to this market segment 3
companies and 13 Privatization Investment
Funds (PIFs). Total market capitalization also
increased from US$ 522.7 million on
December 31st, 2003 to US$ 1.3 billion on
December 31st, 2004. More than 60% of the
above mentioned amount is related to the
official market.
HISTORY AND DEVELOPMENT
The adoption of The Law on Securities in
1998 provided the necessary legal
framework to establish the capital market of
the Republic of Srpska and the Stock
Exchange. The National Assembly of the
Republic of Srpska appointed the first
members of Republic of Srpska Securities
Commission in 2000 as the highest authority
and supervisory body in the capital market
of the Republic of Srpska. In the beginning
of 2001 the Central Registry of Securities
was established in accordance with the Law
on Central Registry, which started with the
registration of securities from the
privatization process as the first market
material. All of these events have created
the necessary environment for the
establishment of the Stock Exchange.
On 9 May 2001, eight Banks and one
company trading in securities signed the
Contract that established the BLSE as the
first Stock Exchange in the Bosnia and
Herzegovina. In August 2001, the Republic
of Srpska Securities Commission issued a
working permit to the Banja Luka Stock
Exchange, which operates as non-profit,
self-regulatory, private organization.
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As a result of improvement of the financial
disclosure, the participations of foreign
institutional investors have significantly
increased, which indicates the
internationalization of the BLSE market.
During 2004, two BLSE indices were created.
The Stock Exchange Index of The Republic
of Srpska (BIRS), which includes 10
companies with the largest market
capitalization, indicated an increase of 15%
for an 8 month period. Total return on BIRS
for this period was over 20%. The
Privatization Investment Funds Index (FIRS)
includes 13 shares of Privatization
Investment Funds (PIFs). FIRS increased
from September 1st to December 31st, 2004
by 85%.
Positive growth indicates increasing
investor’s interest and confidence in the
BLSE, which is largely due to the BLSE’s
promotional and educational activities.
As a result of improvement of the financial
disclosure requirements (Financial
statements for Privatization Investment
Funds are disclosed on a monthly basis), the
participation of foreign institutional investors
has significantly increased, which indicates
On 5 March 2002, a contract for the transfer
of license between the Directorate for
Privatization and the BLSE was signed that
provided the BLSE with an electronic trading
system (BTS) developed by the Ljubljana
Stock Exchange.
The first Banja Luka Stock Exchange trading
session took place on 14 March 2002,
involving six Members that traded 20 listed
securities.
In September 2002, the Law on Takeover
came into force and thus further improved
the position of small shareholders and the
quality of corporate governance in the
Republic of Srpska.
On 21 January 2003, the first session of The
Listing Commission took place and stocks
of 13 Privatization Investment Funds were
admitted to the official market of the BLSE.
On May 2004, the Stock Exchange Index of
Republic of Srpska (BIRS) was established
as the first index in the Republic of Srpska.
the internationalization of BLSE market. We
are especially proud of the increasing
number of small local investors, which
indicates the success of the BLSE in
educational activities. This has not been an
easy task, bearing in mind that almost all
citizens had a reason not to believe in new
things such as investing in capital markets,
because of the frozen saving accounts issue.
An important result during 2004 was
participation in the privatization of more than
60 state owned companies. Finally, the BLSE
became a full member of FEAS in November
2004.
Note: Please note that there is a difference
between BLSE reported numbers in the
message from the CEO and the FEAS
statistics based on auction for state owned
capital and block transactions reported to
BLSE which are not included in the FEAS
statistics.
FUTURE OUTLOOK
In 2005 the BLSE plans to:
• install a new web information portal, which
will enable investors to access a large scope
of data, such as the macroeconomic
situation in Bosnia and Herzegovina, trading
information, financial statements and
ownership structure of the listed;
• encourage new listing of successful local
companies;
• continue with educational and promotional
activities;
• initialize creation of national corporate
governance standards;
• introduce new market instrument such as
long term governments bonds issued on the
basis of the frozen savings; and
• initiate continual trading with securities
listed on the official market.