FEAS Yearbook FEAS Yearbook 2012 | Page 105

FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2012 SARAJEVO STOCK EXCHANGE SASE attracted new shareholders and for the first time in three years showed a positive financial result. Zlatan Dedic General Manager An unfavourable political environment, a low level of Foreign Direct Investments, a non- stimulative business ambient and unsatisfactory commitment to economic reforms - all of these factors did not contribute the development of the capital market in the Federation of Bosnia Hercegovina in 2011. Nevertheless, SASE accomplished some significant improvements: the trading result were significantly better compared to 2010, the BIFX and SASX-30 indices had a positive annual return, and important measures to the development of the market have been undertaken; the Stock Exchange attracted new shareholders and for the first time in three years showed a positive financial result. HISTORY AND DEVELOPMENT The Sarajevo Stock Exchange (SASE) was founded in September of 2001 by eight brokerage houses and commenced trading on April 12 of 2002. The SASE is a joint- stock company and a central marketplace for securities trading in the Federation of Bosnia and Herzegovina. The SASE currently has 12 members, whose headquarters are spread around the Federation of Bosnia and Herzegovina, the majority being in the capital, Sarajevo. Trading on the SASE is performed electronically through an order driven electronic trading system BTS (Stock Exchange System). SASX-10 is the main index on the Sarajevo Stock Exchange. It reflect the price movement of the top 10 issuers on the Sarajevo Stock Exchange (excluding investment funds) ranked by market capitalization and frequency of trading. In 2009 was performed a segmentation of Free market on the Primary Free market, the Secondary Free market and the Market for the issuers in the bankruptcy proceedings. The annual turnover was positively influenced by two successful treasury bill auctions through which the Federation collected over 90 million KM through the market. Significant efforts by the staff in 2011 led to the implementation of new measures aimed at development of the market and to shrink the gap vis-a-vis the developed markets. Amongst the most important one was the mass-delisting of low liquid and non-transparent securities from the market, more stringent listing requirements, the possibility to delist securities if the issuer neglects its disclosure requirements, introduction of volatility interruptions and the change of the static price limits. Besided measures for a more thorough surveillance over the trading process and especially the business operations of the trading members (Red Flags, investors black book, restricted accounts etc.), SASE implemented also the surveillance of the IT- system of the trading members. Turnover on SASE has risen substantially, which can be illustrated by the fact that in 2007 it rose up to US$ 961.5 million - more than in 2005 and 2006 combined. There were 4 mutual funds founded in 2007, and more are currently in preparation. In 2009 as a result of global financial crisis sharp decrease in turnover affected SASE where we finished the year with US$ 153,7 million. The effects of financial crisis were even more strongly reflected in 2010, so that annual total turnover on SASE was US$ 74,9 million. FUTURE OUTLOOK In 2011, the amount of the total turnover was US$ 165,7 million, and regarding to 2010, is increased by 125,50% - if we exclude the primary emissions, then it is an increase of 41,72%; indices BIFX and SASX-30 are in positive zone; it was taken a series of measures to improve the capital market; SASE has received the new shareholders in the process of recapitalization, and after three years in losses, SASE ended 2011 with a profit of US$ 49.038. The year behind us was a hard but successful year. Before us lies another year filled with challenges to advance the quality of the capital market in the Federation of Bosnia- Hercegovina, to which we look in confidence and optimism. In 2011, for the first time since the beginning of the crisis of 2007, the trend of ever falling yearly turnovers was broken. Even without the turnover from the primary auctions for government treasury bills, the turnover in 2011 was 42% higher than in the previous year. In 2012, we expect to see more government debt securities on the market, including long-term bonds and short term treasury bills. Given the high excess liquidity of the banking market, we do not expect a great deal of secondary trading with these securities, at least not in the first half of the year. Although announced each year, we have reasons to believe that in 2012 we will see the privatization of some companies where the state has at least a minority stake. The need to finance the budget deficit will make it necessary for the state to sell their stake in some companies, despite the current crisis on the markets and the low interest of investors. We also see the potential that the state will take a greater role in the development of the financial markets in general, and the capital market in special in 2012. For the first time in ten years, representatives from the government are taking an active role in defining a strategy for the development of this segment of the Bosnian economy. In 2012, SASE will put emphasis on the education of domestic investors, who still are hesitant to engage in securities trading. PAGE 103