FEAS Yearbook FEAS Yearbook 2013 | Page 71

FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2013 MONTENEGRO STOCK EXCHANGE Continuous development of our market is the basis of the future of the MSE. Mr. Gojko Maksimovic Acting CEO The negative trends in Montenegrin capital market continued into 2012. Compared to 2011, around 43% lower turnover is generated, and similar situation is with the total amount of transactions concluded. As the main factor for the negative results achieved, there is currently poor macroeconomic situation, both in Montenegro and beyond, which left the effects primarly on less money available for investments, both in the retail and in the institutional sectors. In addition, the Montenegrin capital market should continue to be seen as an emerging market that is usually labeled as a risky, which results in avoiding during moments of recession, due to the reluctance of HISTORY AND DEVELOPMENT Montenegro Stock Exchange was established in June 1993, pursuant to the Law on Money and the Capital Market. The first shareholders of the Stock Exchange were the Republic of Montenegro and four banks from Montenegro: • • • • Montenegrobanka A.D. Podgorica; Pljevaljska banka A.D. Pljevlja; Beranska banka A.D. Berane; Hipotekarna banka A.D. Podgorica. After taking authority from Federal Commission of Yugoslavia for the Securities and Financial Markets, in December 2000, the Commission for Securities of the Republic of Montenegro, has given, after determining the fulfillment of all the necessary preconditions, the Montenegro Stock Exchange a business license. On 20 September 2001, six Montenegrin financial institutions and Brokers Business Association founded the New Securities Exchange of Montenegro. Montenegro Stock Exchange completed the final harmonization with the Law on Securities Montenegro in 2004, which led to a situation in which, until the end of 2010, there were two stock exchanges operating. The start of operations of the New Securities Exchange of Montenegro is significant because for the first time in Montenegro capital market transaction were executing by electronic trading system. investors and their seeking for the secure returns. As a consequence of such a bad environment, compared to the beginning of the year Montenegro Stock Exchange has six members less (brokerage firms). During the observed period, there was a growth of companies’ index MONEX20 for aproximatelly 3%. In the case of companies’ index, if we take into consideration the dividends paid by the companies that constitute the mentioned index, the realized profit would be 7.05%. It should be noted that compared to the previous years there was a considerable improvement of the market regulations by the implementation of new legal regulations of the Montenegro Stock Exchange, which led to an increase in the level of companies’ transparency. Furthermore, major improvement of technical infrastructure has enabled us to introduce the online trading system by implementing the new software - BrokerOffice. We have to emphasize that during this year we have achieved good results in terms of communication with the Government of Montenegro that resulted in issuance of government bonds. Successfully completed emission represents a major step ahead for our capital market, as we have proved that we are becoming a place for successful capital raising. In the beginning of 2011, the two Montenegrin stock exchanges were integrated, through the merge of the New Securities Exchange of Montenegro to the Montenegro Stock Exchange. The first working day on the single Montenegro Stock Exchange was 10 of January 2011. At this moment, Montenegro Stock Exchange has 13 members. In overall shareholder structure of the Montenegro Stock Exchange 12 financial institutions from Montenegro participate with approximately of 93% ownership. through the affirmation of private companies (which have high amounts of annual revenues) established as a limited liability companies, to their transformation into joint stock companies. In this way, the Montenegro Stock Exchange would get its full role as a place of raising capital through the formation of joint stock companies and also would become available for the small and medium enterprises, which their dissatisfaction towards the expensive loans of commercial banks in Montenegro are expressing for a longer time. The big challenge for our capital market is the process of Montenegro’s accession to the EU. Accordingly, we will shortly have the changes of capital market regulations and its harmonization with the European legislation (MiFID regulation). We hope that mentioned implementation of the European laws will bring positive effects to our market. As our main task we have to solve the problem of liquidity in the market through creation of mechanisms of “borrowing” shares (primarily pledged) and by introduction of market-makers. Another key task will involve improvements in regional cooperation with other stock exchanges by means of possibility of creating a common trading platform and on this basis, at least the formation of “virtual” joint capital market. FUTURE OUTLOOK It aims to Current situation in the capital market stimulated our greater activity in the field of permanent services improvement that we offered as the best way to confront crisis. The following years will be very challenging for us. We will try to make a greater impact in order to increase the number of financial instruments on Montenegro Stock Exchange through more active role of the Government, primarily in terms of rising the number and volume of bonds emission, and by implementation as well as the introduction of treasury bills trading. This will be possible by further transformation of certain governmental and public enterprises into joint stock companies and by introducing the sale of a part of the capital by initial public offering (IPO). In addition, we expect to increase the number of financial instruments PAGE 69