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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005 BULGARIAN STOCK EXCHANGE George Draychev CEO 2004 has definitely been a good year for the Bulgarian Stock Exchange (BSE) and for the capital market as a whole. If we take into consideration the SOFIX (the official index of the BSE-Sofia), 2004 has seen a very good performance. Starting at 454 points at the beginning of last year it reached over 625 points at year’s end. Market capitalization has grown significantly, reaching US$ 2 billion at the end of 2004, comprising 8% of GDP. Currently there are 331 companies listed or admitted for trading on the Bulgarian Stock Exchange, 31 of which are on the Official Market and 300 on the Unofficial Market. The positive development of the stock market is the result of the overall stabilization of the Bulgarian economy. We are seeing a positive impact from the government’s commitment to develop the capital market and to use this market as a public and transparent mechanism for privatization. The Exchange is currently working on HISTORY AND DEVELOPMENT The first Stock Exchange Act was adopted in 1907 and regulated the structure and operations of stock and commodities exchanges. The Securities, Stock Exchanges & Investment Intermediaries Act was adopted in July 1995, which led to a process of stock exchange consolidation. In July 1997, the present Bulgarian Stock Exchange-Sofia was established. In accordance with the requirements of the new law, a Securities & Stock Exchange Commission was set up. On 9 October 1997 the Commission officially licensed the BSE-Sofia. The first trading session on the regulated market took place on 21 October 1997. By the end of 1999 there were 32 companies listed on the Official Market and about 1,000 companies admitted for trading on the Free (OTC) Market as a result of the mass privatization program. On 6 December 2001 the Commission officially licensed the BSE- Sofia to organize an Unofficial Market, which replaced the Free Market and set clear rules for regulation of all companies traded on the Exchange. PAGE 62 We are seeing a positive impact from the government’s commitment to develop the capital market and to use this market as a public and transparent mechanism for privatization. enhancing the existing information disclosure framework. The BSE-Sofia, the Central Depository and the Financial Supervision Commission have established a joint project for the development of an integrated electronic system for disclosure of information called EXTRI. This new system will enable issuers to disclose information simultaneously to the country’s three main securities institutions - BSE-Sofia, the Depository and the Commission. The system will accommodate the processing of both file transfers and paper documents for disclosure of price-sensitive and other information required by the market. As a web-based system, each EXTRI user will be registered and submitted documents will have to be signed via electronic signature. The official launch of the system is scheduled for 2005 and a number of positive effects are anticipated as a result of its implementation. In December 1999 a new Public Offering of Securities Act was adopted by the Parliament. The law is aimed at providing protection for investors and creating prerequisites for the development of a transparent capital market in Bulgaria with criteria similar to those of the European Union. The Securities & Stock Exchange Commission was first renamed the National Securities Commission, but in March 2003 it was replaced by a new supervisory body - the Financial Supervision Commission (FSC). More than just a name change, the move pulled together the regulation of a number of financial (non-banking) sectors under one body. The regulatory changes during the year directly improved conditions for investors and issuers, as well as underlined the government’s commitment to encourage wider overall development of the capital markets. Steps will be taken to stimulate market liquidity and increase the attractiveness of the markets on the BSE-Sofia. The main objective is to attract more companies for listings and more issuers to the stock exchange. The BSE intends to broaden the spectrum of financial instruments traded on the exchange. This includes the establishment of a derivatives (futures & options) market. Recently a new index was introduced – the BG 40. The reason for the introduction of the BG 40 is to give an alternative measure of overall market performance with a broader base and different method of calculation. The launching of the new index is considered to be part of the long-term plans to introduce index-based derivatives in the market. FUTURE OUTLOOK In 2005 the Bulgarian Stock Exchange (BSE) will continue to improve the operational efficiency of its trading system, market surveillance and disclosure framework. The BSE, the Central Depository and the Financial Supervision Commission will launch an integrated electronic system for disclosure of information called EXTRI. This new system will enable issuers to disclose simultaneously to the three securities institutions in Bulgaria. As a webbased system, each EXTRI user will be registered and submitted documents will have to be signed via electronic signature. Thus we will have a standardized reporting system which will also facilitate data processing. We expect the amount of current paperwork to be reduced by at least 90%. At the beginning of 2005 the BSE will introduce its new index – BG 40. The idea behind the new index is to give an alternative measure of overall market performance with a broader and different method of calculation.
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005 BULGARIAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July-04 15.0 0.68 25.4 1.2 Aug-04 12.3 0.56 2.5 0.12 Sep-04 27.0 1.4 11.6 0.58 Oct-04 111.7 5.3 12.7 0.60 Nov-04 146.5 6.7 57.3 2.6 Dec-04 153.6 7.7 67.8 3.4 TOTAL 466.1 3.7 177.5 1.4 Bonds July-04 0.89 0.04 0.0008 0.00004 Aug-04 5.3 0.24 0.006 0.0003 Sep-04 5.4 0.27 0.006 0.0003 Oct-04 7.7 0.37 0.008 0.0004 Nov-04 12.1 0.55 0.01 0.0004 Dec-04 18.4 0.92 0.02 0.0009 TOTAL 49.8 0.40 0.05 0.0004 Other July-04 7.7 0.35 52.5 2.4 Aug-04 5.1 0.23 34.4 1.6 Sep-04 7.4 0.37 46.8 2.3 Oct-04 21.6 1.0 115.4 5.5 Nov-04 120.8 5.5 360.2 16.4 Dec-04 92.3 4.6 168.2 8.4 TOTAL 254.9 2.0 777.4 6.1 Market Capitalization US$ Millions Index July-04 1,923.1 531.4 Aug-04 2,054.2 556.3 Sep-04 2,241.7 586.5 Oct-04 2,332.8 639.8 Nov-04 2,582.9 630.7 Dec-04 2,800.8 625.3 CONTACT INFORMATION MONTHLY STOCK VOLUME VS INDEX (US$ Millions) 160 140 120 100 80 60 40 20 0 Stocks Index July Aug Sep Oct Nov Dec Contact Name Mr. Panteley Karassimeonov E-mail bse@bse-sofia.bg Website www.bse-sofia.bg 700 600 500 400 300 200 100 0 MONTHLY MARKET CAPITALIZATION (US$ Millions) 3,000 2,500 2,000 1,500 1,000 500 0 July Aug Sep Oct Nov Dec PAGE 63
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