FEDERATION OF EURO-ASIAN STOCK EXCHANGES
SEMI ANNUAL REPORT OCTOBER 2006
MACEDONIAN STOCK EXCHANGE
Ivan Steriev
CEO
2005 was without any doubts the best year
since the commencement of trading at the
Macedonian Stock Exchange (MSE) in 1996,
both in terms of turnover and securities prices
appreciation. Total turnover reached EUR 145
million which is close to a 7% increase as
compared to 2004. However, more detailed
analysis of the turnover shows the quality level
of the MSE performance in 2005: trading in
equities through BEST reached EUR 75,5
million (262% increase compared with the
same figure in 2004), bond trading was EUR
33,9 million (42% higher than in 2004) with
simultaneous decrease in block trading (EUR
28,4 million or 66% decrease from 2004).
Lower volume of block trading should be
characterized as a positive trend as that
means that MSE in 2005 did not primarily
serve as market for company control as it
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 Republic of Macedonia.
The MSE was founded as a not-for-profit joint
stock company with founding capital of EUR
500,000. At that time, the only eligible
founders were banks and other financial
institutions. MSE initially had 19 members:
13 banks, 3 saving houses and 3 insurance
companies. In 1997, the number of members
decreased to 7 because at that time MSE
members could be legal entities whose sole
activity was trading in securities (brokerage
houses.
The new Securities Law from 2000 introduced
again the possibility of banks being MSE
members (starting from 2002). Only brokers,
authorized by the MSE members may trade in
securities at MSE (in Macedonia there are 253
brokers).
MSE currently has 15 members–9 brokerage
houses and 6 banks. According to the 2000
Law, the initial share of capital of each MSE
member must be at least EUR 75,000 (license
for acting as an agent) and the liquid capital
must be EUR 15,000. In order to get full
license as broker-dealer, brokerage company
must have at least EUR 500,000 share capital.
Due to a change in the law, in June 20, 2001,
MSE started to operate on a for-profit basis,
with a founding capital of EUR 500,000. MSE
PAGE 98
2005 was without any doubts the best year
since the commencement of trading at the
Macedonian Stock Exchange in 1996, both
in terms of turnover and securities prices
appreciation.
used to be a case in the previous years.
The new MSE index (MBI 10) introduced at
the beginning of 2005 was up around 130%
p.a. Also, MSE ended up 2005 with 57 listed
companies that have a market capitalization
of around EUR 540 million, increasing the
total market capitalization of listed companies
by 78% compared with the end of 2004 (when
there were 68 companies listed at the MSE);
Main factors contributing to the volume and
price increase at the MSE:
• improved transparency of the listed
companies operations;
• the influx of foreign portfolio investors who
carried out new valuations of many
undervalued securities (in period April-
December the foreigners participated with
32.6% in the total buying turnover and 10% in
shareholders may be any legal and private
domestic and foreign entity. Shareholdings
per entity is limited up to 10% of the MSE
outstanding shares.
Currently MSE has 20 shareholders
(8 brokerage houses, 8 banks, 1 insurance
company and 3 private investors).
the total selling turnover at the MSE);
• the start of the operations of the new private
pension funds within the pension system
reform process
• the vibrant activity in the Macedonian
banking
Also, during 2005 MSE made significant
changes in its trading system in order to
boost trading in its illiquid stocks (modifying
the opening price calculation algorithm,
introducing automatic switch between its call
and continuous trading system module and/or
imposing and lifting the price limits
fluctuations, introduction of interruptible
auction after smaller price fluctuations,
imposing new rules for exposing orders and
widening the size and transparency of its
public order book etc).
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. This development that actually started
in 2005 will probably continue in 2006 and
hopefully will be additionally boosted due
to the granted EU candidate status for the
Republic of Macedonia.
FUTURE OUTLOOK
The listed companies will have an exemption
of 30% of the profit tax in 2006 and 15% of the
profit tax in 2007.
MSE also expects the possible sale of the
government shares in the Macedonian
Telecom through the stock exchange and
subsequent listing of these shares, as well
as the sale of the national electric power
company through the stock exchange.
The level of disclosure and corporate
governance are planned to be strengthened
simultaneously with the revising of the MSE
Listing Rules and the implementation of the
MSE Code of Corporate Governance.
Dissemination of the data related with the
listed companies is planned to be reorganized
by introducing an internet-based software
application that will be used by the issuers for
their public disclosure purposes. The
implementation of this application is planned
for January 2006.
The participation of the foreign portfolio
investors on the Macedonian securities
market should further increase due to the
After obtaining the first credit rating from S&P
in July 2004 (BB with positive outlook), the
Macedonian Government in November 2005
started issuance of new government bonds
denominated in local currency which should
contribute to a further increase in the trading
activity in debt instruments at MSE in 2006. In
December 2005 the Republic of Macedonia
has issued its first eurobond, which is listed
on the London Stock Exchange. In November
2005 Fitch Ratings gave the Republic of
Macedonia long term credit rating in domestic
and foreign currency “BB” with positive
prospects, short term credit rating “B” and
maximal country rating “BB.”
Two newly founded private pension funds
within the mandatory second pillar of the
reformed pension system in the Republic
of Macedonia started their operations in the
second half of 2005, creating the first
institutional investors on the market.
MSE should continue its international
co-operation arrangements, maintaining
already established informational network
SEM-ON.NET (with exchanges from Ljubljana,
Varazdin, Sarajevo, Banja Luka, Belgrade
and Podgorica).