Theme: Why Is The Macedonian Stock Replace Fap Turbo Unsuccessful?
July 31, 2009The Macedonian Stock Change (MSE) is not in effect successfully fap turbo. True, some of the parameters which we use to measure the succeeder of a stock convert have lately improved in the MSE. For instance, the monthly money volume has inflated together with the number of dealings. But this is a far cry from success fap turbo.
Who is to blame? Is the current direction of the MSE terrible?
I don’t think so. Really, I think the MSE has an supreme management team, doing their ideal to incorporated new dealing techniques and to list new firms fap turbo. The jobs lie elsewhere.
A stock exchange is a very important financial commercialise. It is a highly cost-effective and visible official document of financing. In the West, it is used to finance most of the needs of corporations, direction above financing independent from banks. Somebodies and firms save some of their income and invest it. The stock exchange is meeting grounds for savers wishing to invest their savings - and firms looking for investment funds.
Another function of stock substitutes is to assist governments in financing their internal taking up requirements. Governments trade obligations (called bonds) to investors through the stock substitutes in their countries. A stock replace is, therefore, an required tool for re-financing subject debt.
But a few conditions must prevail before a stock exchange functions the right way.
The most essential condition is the macrocosm of a substantial, growing economy in the stock exchange’s country. Investors flock to robust thriftinesses and shy away from sickly ones.
On the face of it, the Macedonian economy belongs to the latter category. High unemployment, low savings, retarded development, a gaping trade and payments shortfalls. But this is an optical illusion. The economy is in much well shapes that most Macedonians would care to admit. The unemployment figures are tipped. They reflect efforts to evade paying social taxes - not real unemployment. The economy is growing, even by official ideas. The black economy is getting even faster. The deficits are covered by large capital extracts from donor countries. Macedonia is acquiring more external accredits per capita than Russia. It is invariably convenient to blame the declining economic climate - but the cold, objective figures don’t bear this out.
When an economy is developing - the profits of companies (including those listed in the MSE) will grow with it. This makes the shares of these companies an interesting purchase.
Since no one is buying - we must look for the problem elsewhere.
A prospering stock replace is linked to the existence of the right micro and macro economic management. Macedonia has more than its share of troubles in this obedience.
The process of transmutation of businesses with social capital had four basic flaws:
first, it presented no new management, ideas or particular to the beleaguered firms which were “transformed”. The market simply does not think about that they were transformed. The same somebodies run the same shows under a different hat.
Second, such translation violates the construct of Hierarchy, a chain of bidding.
It blurs the preeminence between labour (workers) and capital (owners). What is wrong with that’s that a ship must have a chieftain - and only one. Someone must have the self-assurance and the responsibility. Collective management is no direction at all.
Moreover, innovation exchange and revitalization are all prevented. What change could come from the same set of worn out managers? How can thousands of possessors decide to worsen the develops of the workforce - if owners and labourers are one and the same? So, management is alloyed by impertinent, non-economic considerations: power battles amongst groups of workers, social considerations and political ones.
We celebrated one villain. The other one is high (real) interest rates. When interest rates are high, three results prevent the resuscitation of the stock exchange:
First, firms have high financing expenses (interest payments) - which shrinks their nets. Second, it is not worthwhile to take over money and to invest in shares.
Third, it is more tempting to invest money in bank deposits, yielding high interest rates - than in shares. High interest rates are the poison of stock exchanges.
The same is true for low savings rates. If somebodies and firms don’t save - there’s no capital available for investment funds in stocks.
This, exactly, is the current position in Macedonia : impossibly high interest rates coupled with exceedingly low savings. There’s basic misgiving between clients and their banks. They favour other ways of keeping their money.
But all the above is far from exhausting the list of pre-conditions for the proper functioning of a stock replace.
Investors must have apropos, accurate and full entropy about the firms that they invest in. This will allow them to reply in real time to developing in the company and to prevent losses. This will also make it difficult to cheat them - which is were we come to the question of record-keeping standards. Only lately have the accounting rules in Macedonia been changed to conform to the Western schemes of record-keeping. Even now, the law of similarity is very slight. Macedonian firms maintain a double record-keeping system. One set of books is tax-driven. It is thought to show losses or gains at the whim of the management. An elaborate scheme of hidden reserves lies at the heart of the typical financial commands of the Macedonian firm. Another set of books - if they are kept at all - meditates reality. This is an enormous barrier to foreign investment - and foreign investors are the driving force in each modern stock exchange.
The trust of investors in the stock substitute is based on legislation to protect their attribute rights against the firm’s management’ against the authorities and against other investors who might wish to rig the market or manipulate the prices of breeds.
But legislation without an actual judicial and law enforcement systems of rules is like a stock exchange without money. To enforce property rights in Macedonia takes ages and even then the outcome is not certain. Laws, regulations are in their embryonic stage and some of them seem to have had an abortion: they were in haste and unwisely copied verbatim from legal codices of other countries (Germany, Britain).
Last - but definitely not least - is the existence of a fair, transparent and non-corrupt marketplace. The stock exchange, the banks, the inhibitory authorities, the police and the courts have to be above suspicion. For the market to be utterly capable - it must be utterly free of any ulterior considerations and motives. Corruption distorts the market’s allocative mechanics and powers. It is well discernible in traffics in the stock exchange for all to see. A stock exchange is, after all, the showcase of the local economy.
But there is a problem which predominates above all other troubles and it is nearly endemic to Macedonia. It helps to explain much of the plight of the stock exchange in Skopje. It is the fact that the market is missing its most essential player: the Government.
Investors - both foreign and domestic - look for the Government to be active in the local stock exchange. Governments throughout the world use their stock exchanges to sell shares of state-owned enterprises to their populace. The stock replace becomes a mechanism for the distribution of the national wealth - as embodied by the say owned enterprises - to all the citizens. As we stated before, governments also use the stock alternative to borrow money from their citizens.
The Government of Macedonia does neither. It wholly ignores the MSE. Not one company was privatized through the MSE. Not one Denar was borrowed from a Macedonian citizen through it. A government’s activity in the stock replace is proof that the government believes in it. Therefore, if it does not operate in the stock exchange - it proves that it does not conceive in it. If the government does not trust in the stock exchange in its personal country - why should the investors trust in it?
There are a few additional structural characteristics which are considered to be the hallmarks of a healthy stock exchange. But those are the by-products of all the above mentioned conditions.
A stock exchange must be liquid so that investors would be able to convert their shares into cash easily and expediently. It must include many investing options - professionally put, it must be broadened. This will grant the investors to select from a variety of investing and also to reduce their risks by dividing their money among a few types of investing.
The management of the stock switch can help it by presenting effective trading techniques, computerized trading and settlement organizations and so on. The faster investors meet their money when they trade their shares - the more they will be inclined to operate in the stock exchange that allows them that. The easier it is for them to waste their assets by meeting buyers - the more they will favor to work in that stock exchange.
Investing in the stock substitutes in the markets of the emerging economies has been an unhappy decision in the last three years. Stock substitutes from Russia to Hungary and from Lithuania to Poland have jeered wildly since the end of 1993.
They resembled a rolling wave coaster in their performance, going up and down by tens of percents annually. There are exceptions to this rule. The Ljubljana Stock exchange, for instance. The dealing volume there has gone up 10 times since December 1993 - and the market capitalisation is up 30 times. But this is because of the performance of the common economy in Slovenia. In Croatia, the government is privatise its holdings in say owned companies by auctioning shares to the public through the Zagreb Stock Exchange. This has helped it a lot.