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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005 MACEDONIAN STOCK EXCHANGE Dr. Evgeni Zografski CEO 2004 was a successful year for the Macedonian Stock Exchange (MSE). Total turnover rose more than 10.0% compared with 2003 although trading in equities and bonds was higher than 2003 (equities 13.5% and bonds 14.4% higher). The stable inflation rate (around 2% per annum) and a fixed foreign exchange rate to the Euro created further financial and fiscal stabilization which has provided the right environment for sustainable economic growth for the next few years. HISTORY AND DEVELOPMENT The MSE 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. According to the legislation that was in force in 1996 only eligible founders of the MSE were banks and other financial institutions (saving houses and insurance companies) MSE had initially 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 could only have been legal entities which 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. Starting from June 20, 2001 (with the new amendments of the Securities Law), MSE started to operate on a for-profit basis. MSE shareholders may be any legal and private domestic or foreign entity. Shareholdings per entity is limited up to 10% of the MSE outstanding shares. PAGE 94 The stable inflation rate (around 2% per annum) and a fixed foreign exchange rate has provided the right environment for sustainable economic growth for the next few years. The main features of the MSE operations in 2004 are as follows: • 68 listed companies with market capitalization of around US$ 413 million (EUR 303.5 million) (7.2% of GDP),showing increase of 14% compared with 2003; • significantly higher volume of trading in listed government bonds (turnover of four government bonds was 14.4% higher than 2003); Currently MSE has 20 share holders (8 brokerage houses, 8 banks, 1 insurance company and 3 private investors). At their meeting on 25 December 2003, Shareholders issued 10% of outstanding shares to the Athens Stock Exchange. FUTURE OUTLOOK • After the expiration of the mandatory listing (as of end of 2004) the number of listed companies at the MSE is likely to be decreased (from around 70 to 60 companies); • The level of disclosure and corporate governance are planned to be strengthened simultaneously with the revising 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 the foreign portfolio investors on the Macedonian securities market should increase due to the better transparency achieved during the mandatory listing period and favorable financial ratios of some of the Macedonian companies compared with their peers 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. • 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 • 87 residual government shares with the turnover of US$ 8.5 million (EUR 6.4 million); and • MBI index increased 14.7% reaching level of 1,352. The international cooperation of the MSE with the other stock exchanges in the region (Athens Stock Exchange, Thessalonica Stock Exchange, Belgrade Stock Exchange, Zagreb Stock Exchange and Bulgarian Stock Exchange) was also intensified in 2004. amounts collected from the pension fund’s members in one part should be invested at the secondary securities market, especially in debt instrument traded at the MSE; • Pension reforms will contribute to the development of one of the missing elements of the Macedonian securities market – setting up the custody operations with major Macedonian banks. • MSE will initiate introduction of new products on the market a project of the securitization of the bank’s and interenterprise’s claims; • MSE will consider 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; and • MSE should continue its international cooperation arrangements – finishing the private offering of its shares to Hellenic Exchanges Holding SA (10% of MSE shares), maintaining already established informational network SEM-ON.NET (with exchanges from Ljubljana, Varazdin, Sarajevo, Banja Luka, Belgrade and Podgorica) and becoming a corresponding member of FESE.
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005 MACEDONIAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July-04 3.5 0.21 1.44 0.09 Aug-04 1.8 0.10 0.29 0.02 Sep-04 4.5 0.26 0.57 0.03 Oct-04 46.7 3.11 5.42 0.36 Nov-04 8.7 0.48 5.73 0.32 Dec-04 11.4 0.64 0.71 0.04 TOTAL 76.6 0.80 2.40 0.14 Bonds July-04 3.1 0.18 3.9 0.23 Aug-04 1.5 0.09 1.9 0.11 Sep-04 1.9 0.14 2.4 0.17 Oct-04 2.5 0.16 2.8 0.19 Nov-04 2.2 0.12 2.4 0.14 Dec-04 3.3 0.18 3.5 0.19 TOTAL 14.5 0.15 17.0 0.17 Other July-04 0.0002 0.0001 0.40 0.02 Aug-04 0.0 0.0 0.0 0.0 Sep-04 0.0 0.0 0.0 0.0 Oct-04 0.0 0.0 0.0 0.0 Nov-04 0.0 0.0 0.0 0.0 Dec-04 0.0 0.0 0.0 0.0 TOTAL 0.002 0.0001 0.40 0.02 Market Capitalization US$ Millions Index July-04 347.6 1,195.8 Aug-04 347.6 1,225.2 Sep-04 1,085.2 1,278.9 Oct-04 361.8 1,287.0 Nov-04 452.5 1,329.0 Dec-04 413.1 1,351.6 CONTACT INFORMATION MONTHLY STOCK VOLUME VS INDEX (US$ Millions) 50 45 40 35 30 25 20 15 10 5 0 July Aug Sep Oct Nov Dec Contact Name Mr. Milco Kupev E-mail mse@mse.com.mk Website www.mse.com.mk 1,400 1,200 1,000 800 600 400 200 0 MONTHLY MARKET CAPITALIZATION (US$ Millions) 400 350 300 250 200 150 100 50 0 July Aug Sep Oct Nov Dec PAGE 95
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