Plenty of investors, lack of conditions – Is now high time for regional stock markets to merge?

There are six regional stock markets, six directors and thousands of employees. If stock market consolidation in the region is agreed, all of that will cease to exist. Along with the absence of political will, this might be the major reason why merging has not occurred yet. Both investors and brokers as well as stock market managers in the region agree there is a need for that.

Sandra Jankovic, fund manager at Copenhagen - based Danske Capital, one of the panel participants in this year’s Conference of the Belgrade Stock Exchange, believes that administrative issues are the major obstacles to investment in Serbia and countries in the region.

- Here they say: "Our market is attractive". It is, but there is a number of small markets which are maybe even more attractive. It is necessary to do the job properly and create conditions for stock markets to merge. It is easy for me to invest in the region because I know the language, but foreigners find it more than difficult since majority of companies do not have reports, prospects or other material in English, nor there are departments for investors’ relations (IR) – Jankovic said during the panel "Integration and consolidation in the region – is it time?” at the Conference of the Belgrade Stock Exchange.

If consolidation is a problem discussed every year, if this can revive the capital market and brokers have more work to do, the question that emerges is: Why don't stock markets merge? Who does not find it convenient?

Daniel Nevidal, board member at Zagreb-based Interkapital vrijednosni papiri thinks this probably is not convenient for political elite.

- We are a regional investment group and what would convene us most is first of all joint trading platform. For instance, Baltic countries applied it 30 years ago. They still do not have a joint stock exchange, but they have a joint platform – Nevidal explains.

This would mean that international investors have account in one country but joint depository. More precisely, they would have a joint institution for clearing and balancing.

- Today you have investors from Croatia who would buy NIS shares but they find them too expensive – says Nevidal, who agrees that administration problems and non-compliance are the biggest obstacle to investments.

He adds that insisting on national stock market is “only a road to market isolation”.

Hard to give up on power

Ana Tripovic, director of Wise broker, said that the idea of merging stock markets bother monopolists in their markets. She says the one who holds the market will not give up on it easily.

On the other hand, Tripovic does not have a dilemma as to whether the idea of merging stock markets is good.

- Stock market consolidation would bring more work, expand services, enable introduction of new products, and benefit the whole economy.

She thinks that we might be late with the merger of stock exchanges, but she believes that we should not give up on it because the "there's still time“. The proof is a large interest expressed by investors at the Conference of the Belgrade Stock Exchange.

- It will take us the most time to set up unique, regulatory body which would control everything, then it takes time for cross borders, settlements and unique platform – the director of Wise Broker explains.

Belgrade Stock Exchange ready to merge

(Gordana Dostanic)

Director of the Belgrade Stock Exchange, Gordana Dostanic, says they are constantly talking about this because they want to hear what participants and clients want and where to expect segmentation and moving.

It is necessary to harmonize post trading activities, opening of the account and everything that is necessary to issue an order and its implementation at the stock market. Procedures should not be split and not every market (country) should have its legislation.

Although it was heard that stock market management can postpone consolidation in order to keep their influence in national stock markets, Dostanic does not agree with that.

As she says, Belgrade stock market would be ready for merging.

Better offer

(Miroslav Radakovic)

Miroslav Radakovic, the main broker of Sinteza Invest Group, thinks that it is essential that in the upcoming years, the process of regional capital markets merging is carried out in order to increase competitiveness and visibility of our region in the investment map.

He explains that, basically, in the local market, there are only 3-4 shares which could be deemed attractive and convenient from the point of view of foreign investors.

- In the region, the number would increase to some 15 quality and large issuers which could finally attract more significant portfolio investments to our region. Also, it should be pointed out that unification would bring far less paperwork which is often an obstacle to large institutional investors and competition among brokers would result in new quality of service and increased number of innovations – the main broker of Sinteza concludes.

Jelena Djelic