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-0,92%14.11.2008.Conclusions of the Seventh International Conference
Another gathering of domestic and foreign representatives of the capital market, VII International Conference of the Belgrade Stock Exchange, focused on the current problems which are inevitably spilling over the world capital markets, regardless of their level of development and their place in each particular system, i.e. country. General impression of the Conference participants is that joined activities are essential for the crises to be overcome, as well as greater observance and improvement of regulation at all levels and a need to restore reputation of and confidence in the market and its institutions. The conclusions from the Conference discussions can be summarized as follows:
- A conflict of interest may arise when the parties participating on the market are related, either by one of the parties controlling the other or by having significant influence on the other partys decisions or in case of private connections. A conflict of interest may occur with respect to regulation, analysis of business operations, investment banking, corporate governance and company management, between firms and clients or two kinds of clients, etc.
- Issues connected with conflict of interest in the security industry must be dealt with by all relevant national and international institutions, and the regulations of the European Union (MiFID) and the USA (regulations of SEC), as well as of particular markets which are considered to be developed, specifically regulate the issue of possible conflicts of interest. Some of the practical solutions can be the following: diminishing the influence of the investment banking division on analysts and consultants, reduction in trading and disclosure of all connections between market participants, clear explanations of analyses and investment advice, prohibition to perform several linked functions at the same time by one person, etc.
- SPVs (special purpose vehicles) are used for securitization of new projects, distribution of risk and separation of a companys assets from the assets of the project for which an SPV is created. However, such products by themselves are neither »good« nor »bad«, efficacy of their use depending primarily on legislation, quality of management and appropriate structure of such producs, which must be taken into consideration in their formation.
- Social responsibility of companies is increasingly considered by investors, thus more and more funds opt to invest in securities of such companies, as well as in their indexes, which often have better performances then general market and sector indexes. The social responsibility standard requires compliance with the accepted principles of corporate responsibility, ethical principles and those relating to environmental and ecological concerns, but above all such companies are expected to create a long-term value for their shareholders and society and general.
- With regard to social responsibility, companies must also pay due attention to the treatment of employees, related parties, general public, shareholders and potential investors, but also to ecology, responsibility for a wider public (charity activities), etc.
- A rise in defaults after the increase in interest rates in America and fall in real estate prices led to a fall in the value of CDOs and other complex high-risk structured products. The crises on the American mortgage market directly caused negative trends on all market segments where possible risks were not adequately and timely assessed, consequently deacreasing confidence in the entire system. Due to the global connection of markets, the crises was directly reflected on other local markets, affecting the real economy, investors and local credit policies.
- An answer to the global financial crisis can be searched for in individual responses of countries involved in the crisis and at the international level – through an intensified international and institutional cooperation. In that respect, the European Cental Bank and European Commission have a key role in Europe.
- The economic situation in Serbia in 2008 is strongly affected by both global and local changes, including the temporary political instability and current and previously recorded rise in earnings and public spending. During 2008, inflation rose by over 10% at the annual level, gross domestic producs fell to 6.2%, compared to 7.5% last year, public and private spending increased, industrial production in the second half of 2008 slowed down, the volume of direct investments decreased, endebtedness increased, but the exchange rate of the domestic currency and the banking system were stable. The question of privatisation of big public enterprises remains open, as well as the success of the already announced privatisations, but on the other hand some domestic companies were successfully restructured.
- Further growth of the financial system and the capital market must involve increased capacity of the institutions supervising the financial market, improvements in the taxation policy with respect to the capital market, orientation of the State to the development of the market and furtherance of the process of privatisation, etc.
- Companies whose shares are not traded on the Belgrade Stock Exchange have great potential for the development of the domestic capital market, considering their successful business results, realized incomes and market share. A great interest of domestic and foreign institutional investors in these companies indicates that they are undoubtedly future blue-chips of the domestic economy, but regulators and other institutions still have to make appropriate decisions concerning the process of opening and inclusion of these companies into the capital market.
Response of the market participants - local banks, funds, brokers, exchanges and media – is essential, and they should seek to take a joint action, to offer help to those who need it, provide appropriate investment products and improve disclosure of information and education of the general public.
- A conflict of interest may arise when the parties participating on the market are related, either by one of the parties controlling the other or by having significant influence on the other partys decisions or in case of private connections. A conflict of interest may occur with respect to regulation, analysis of business operations, investment banking, corporate governance and company management, between firms and clients or two kinds of clients, etc.
- Issues connected with conflict of interest in the security industry must be dealt with by all relevant national and international institutions, and the regulations of the European Union (MiFID) and the USA (regulations of SEC), as well as of particular markets which are considered to be developed, specifically regulate the issue of possible conflicts of interest. Some of the practical solutions can be the following: diminishing the influence of the investment banking division on analysts and consultants, reduction in trading and disclosure of all connections between market participants, clear explanations of analyses and investment advice, prohibition to perform several linked functions at the same time by one person, etc.
- SPVs (special purpose vehicles) are used for securitization of new projects, distribution of risk and separation of a companys assets from the assets of the project for which an SPV is created. However, such products by themselves are neither »good« nor »bad«, efficacy of their use depending primarily on legislation, quality of management and appropriate structure of such producs, which must be taken into consideration in their formation.
- Social responsibility of companies is increasingly considered by investors, thus more and more funds opt to invest in securities of such companies, as well as in their indexes, which often have better performances then general market and sector indexes. The social responsibility standard requires compliance with the accepted principles of corporate responsibility, ethical principles and those relating to environmental and ecological concerns, but above all such companies are expected to create a long-term value for their shareholders and society and general.
- With regard to social responsibility, companies must also pay due attention to the treatment of employees, related parties, general public, shareholders and potential investors, but also to ecology, responsibility for a wider public (charity activities), etc.
- A rise in defaults after the increase in interest rates in America and fall in real estate prices led to a fall in the value of CDOs and other complex high-risk structured products. The crises on the American mortgage market directly caused negative trends on all market segments where possible risks were not adequately and timely assessed, consequently deacreasing confidence in the entire system. Due to the global connection of markets, the crises was directly reflected on other local markets, affecting the real economy, investors and local credit policies.
- An answer to the global financial crisis can be searched for in individual responses of countries involved in the crisis and at the international level – through an intensified international and institutional cooperation. In that respect, the European Cental Bank and European Commission have a key role in Europe.
- The economic situation in Serbia in 2008 is strongly affected by both global and local changes, including the temporary political instability and current and previously recorded rise in earnings and public spending. During 2008, inflation rose by over 10% at the annual level, gross domestic producs fell to 6.2%, compared to 7.5% last year, public and private spending increased, industrial production in the second half of 2008 slowed down, the volume of direct investments decreased, endebtedness increased, but the exchange rate of the domestic currency and the banking system were stable. The question of privatisation of big public enterprises remains open, as well as the success of the already announced privatisations, but on the other hand some domestic companies were successfully restructured.
- Further growth of the financial system and the capital market must involve increased capacity of the institutions supervising the financial market, improvements in the taxation policy with respect to the capital market, orientation of the State to the development of the market and furtherance of the process of privatisation, etc.
- Companies whose shares are not traded on the Belgrade Stock Exchange have great potential for the development of the domestic capital market, considering their successful business results, realized incomes and market share. A great interest of domestic and foreign institutional investors in these companies indicates that they are undoubtedly future blue-chips of the domestic economy, but regulators and other institutions still have to make appropriate decisions concerning the process of opening and inclusion of these companies into the capital market.
Response of the market participants - local banks, funds, brokers, exchanges and media – is essential, and they should seek to take a joint action, to offer help to those who need it, provide appropriate investment products and improve disclosure of information and education of the general public.
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