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Partners for Financial Stability Capital Markets Trends for SEE and Eurasia 2005- 2010 February 2012 1.

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Presentation on theme: "Partners for Financial Stability Capital Markets Trends for SEE and Eurasia 2005- 2010 February 2012 1."— Presentation transcript:

1 Partners for Financial Stability Capital Markets Trends for SEE and Eurasia February

2 2 PFS Beneficiary Countries Southeast EuropeEurasia  Albania  Armenia  Bosnia and Herzegovina  Azerbaijan  Kosovo  Belarus  Macedonia  Georgia  Montenegro  Moldova  Serbia  Ukraine

3 3 Mentor Countries 10 EU Member Countries  Bulgaria  Lithuania  Czech Republic  Poland  Estonia  Romania  Hungary  Slovakia  Latvia  Slovenia Plus Russia and Croatia

4 4 Response Feedback Responded (12) Albania Armenia Bosnia and Herzegovina Croatia Lithuania Macedonia Moldova Serbia Latvia Montenegro Georgia Estonia Did not respond (8) Azerbaijan Belarus Czech Republic Poland Romania Russia Ukraine Kosovo * Partial Response (4) Bulgaria Hungary Slovakia Slovenia *(no capital market)

5 5 Response Feedback

6 6 Reasons for Partial Response Postponed the Survey Unable to Provide More than Disclosed on Regulator’s Website  Slovenia  Slovakia  Bulgaria  Hungary

7  Number of: o Brokerage Firms o Fund Management Companies o Closed-End Investment Funds o Open-End Investment Funds o Public Companies  Details on Securities Offerings 7 The Survey Requested Time Series Data on:

8  Financial Results for the Infrastructure Entities (Exchanges and Depositories)  Financial Results and Market Share Data for: o Brokerage Firms o Fund Management Companies 8 The Survey Requested Time Series Data on:

9  Public Offering or Private Placement  Type of Issuer  Type of Security Sold  Amount of Securities Registered or Notified (in currency)  Amount of Securities Sold (in currency)  Number of Purchasers  Lead Underwriter 9 Requested Detail on Offerings:

10 10 Requested Data on Infrastructure Entities  Function (Exchange or Depository)  Time Series Financial Results for: o Revenues o Net Income o Assets o Shareholder’s Equity  Time Series for Number of Shareholders

11 11  Form (corporate or contractual)  System of Sales and Redemption o Open-End o Closed-End o Interval  Level of Assets under Management  Number of Investors Requested Data for Investment Funds

12 12  Time Series Data for: o Number of Transactions by the Firm o Total Number of Transactions on the Market o Revenues o Net Income o Assets o Shareholder’s Equity o Number of Shareholders Requested Data for Brokerage Firms

13 13  Time Series Data for: o Assets under Management o Total Industry Assets under Management o Revenues o Net Income o FMC Assets o Shareholder’s Equity o Number of Shareholders Requested Data for Fund Management Companies

14 14 Characteristics of Offerings: 1.There have been far more private placement transactions than public offerings. 2.The amount of capital raised under the private placement approach has also predominated. 3.For SEE, the number of transactions and amount of capital raised has decreased approximately 50% in the wake of the global financial crisis. Results of the Survey

15 15 Characteristics of Offerings (continued): 4.Croatia and the Baltic countries each experienced one year of sharp surge in offerings, but not in the same year. 5.The data for the Eurasia markets do not support current conclusions but instead must be developed further. Results of the Survey

16 16 Number of Public OfferingsNumber of Private Placements

17 17 Total Value of Private Placements (in Euro) Total Value of Public Offerings (in Euro)

18 18

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20 20 Number of Public Companies: 1. A “public company” (or “reporting company”) is usually defined in terms of the number of shareholders and the company’s capital. 2.There are no uniform trends among the countries reporting data for numbers of public companies. 3.Cases where the number of public companies increased appear to correlate to the use of the public offering mechanism (Serbia and Bosnia). Results of the Survey

21 21 Number of Public Companies (continued): 4.A relatively constant number of public companies should correlate to the predominant use of the private placement mechanism (which results in fewer purchasers/shareholders). 5.Some of the marked downward trends may be the result of companies that were previously privatized buying out (or squeezing out) the minority shareholders. Results of the Survey

22 22 Number of Public Companies Albania Bosnia and Herzegovina 1,2631,3111,3921,4621,4771,514 Macedonia Montenegro Serbia 1,0401,1841,7691,8641,7791,619 Armenia Moldova Croatia Latvia Lithuania

23 23 Trading Market Activity: 1.Trading volumes have fallen off significantly in the wake of the global financial crisis. 2.The trend is clear for both CEE and SEE markets. 3.Market capitalizations, which are a function in part of prices, have also fallen off. 4.This trend is also parallel for CEE and SEE. Results of the Survey

24 24 Annual CEE Turnover Volume in US$ (millions) 2002–2010

25 25 Annual SEE Turnover Volume in US$ (millions)

26 26 Market Capitalization for CEE in US$ (millions) Data Source: FEAS

27 27 Market Capitalization for SEE in US$ (millions) Data Source: FEAS

28 28 Trading Markets Activity (continued): 5.Market Capitalizations in SEE are much stronger relative to GDP than for Eurasia. 6.The low market penetration cannot be attributed to large GDPs, as the trend is true for Armenia and Moldova as well as Ukraine. 7.The lack of data prevents complete trend analysis for this aspect. Preliminary Results of the Survey

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31 31 Trading Markets Activity (continued): 8.Similarly, equity trading volumes to GDP are much stronger for SEE than for Eurasia, reflecting their relatively better developed markets. 9.Within Eurasia trading volume penetration to the economy is uniformly negligible. Preliminary Results of the Survey

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34 34 Number of Brokerage Firms: 1.In general, the number of brokerage firms has decreased approximately 25% after peaking 2007 – This appears due to lower activity levels following the global financial crisis. 3.Also it appears some countries were/are “over- brokered” given the size of their markets and economies. Preliminary Results of the Survey

35 35 EURASIA

36 36 Status of the Investment Fund Industry: 1.For SEE, corporate form funds are much more prevalent than open-end funds. 2.Investment funds within Eurasia are almost non- existent. 3.Use of open-end versus closed-end funds is almost equally balanced in Croatia and the Baltic countries. Preliminary Results of the Survey

37 37 Status of the Investment Fund Industry (continued): 4.The level of assets within investment funds appears to have recovered from the outflows resulting from the global financial crisis. 5.This applies for both closed-end and open-end funds. 6.Bosnia and Serbia use a fund form described as “other”; this bears closer investigation. Preliminary Results of the Survey

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39 39 Status of the Investment Fund Industry (continued): 7.There is a downward trend in the number of Fund Management Companies, although the data is lacking for several countries. 8.This is in contrast to the slow rebound in the level of investment fund assets since This is in line with the decrease in the number of brokerage firms but perhaps signals a transition in the markets’ focus from trading to asset management. Preliminary Results of the Survey

40 40 Number of Fund Management Companies Albania Bosnia & Herzegovina Macedonia 564 Montenegro Serbia Armenia Moldova Croatia Estonia Latvia Lithuania

41 41 Financial Health of the Infrastructure Institutions: 1.The exchanges have witnessed a fall-off in revenue since peaking in This correlates to the decrease in trading volumes. 3.Other forms of revenue, such as listing fees and membership fees appear to be providing a floor for income. 4.But overall net incomes are at almost break-even levels. Preliminary Results of the Survey

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44 44 Financial Health of the Infrastructure Institutions (continued): 1.The depositories appear to be weathering the low trading volumes better than the exchanges. 2.This may be due to their fee structure which is geared to assets under custodianship and non- trade transfer revenues. 3.But, again, overall net incomes are very low. Preliminary Results of the Survey

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47 Next Steps for the Survey 1.Return to respondents for completion of data; 2.Refine the survey results and conclusions; 3.Identify common trends and conditions in these markets; 4.Use the data to guide types of development interventions and regional cooperation initiatives. 47


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