SOFIA (Bulgaria), November 20 (SeeNews) – Investors strongly hope that possible sales of major state-owned energy assets on the Sofia bourse and the launch of delayed initial public offerings can jumpstart the depressed Bulgarian capital market, industry officials said.
However, it is still rather uncertain when the market will unfreeze, as the overall economy has yet to show signs of recovery, while no one knows for certain when a thaw could begin.
“Now, we are obviously in a critical situation […] now the trust should be brought back,” Bulgarian Stock Exchange (BSE)-Sofia international affairs director, Panteley Karassimeonov, told SeeNews.
“It is hard to give accurate prognosis but obviously things are moving in that direction, the big economies are exiting the recession – Germany, the United Kingdom. There is no way for this to fail to reflect positively on our market,” he added.
“It is hard to give prognoses,” one of BSE’s two CEOs, Ivan Takev, said. He added the capital market most probably will unfreeze before the overall Bulgarian economy shows signs of steady recovery.
Bulgaria’s economy is expected to contract 2.0% next year, according to the government in Sofia. The central bank expects growth of zero to half percent next year under its optimistic scenario.
Despite the uncertainties, BSE officials believe that the listing of stakes in state-owned energy majors on the BSE, an idea floated recently by the government, will lure back foreign institutional investors who massively ran away from the Bulgarian stock market market after November 2007 and caused a panic escape of individual investors. The idea calls for the bourse listing of mammoth Bulgarian Energy Holding (BEH) group or some of its subsidiares like Bulgargaz monopoly or power grid operator NEK.
“If this happens and the companies come to the bourse, this will accelerate all other processes,” the BSE's other CEO, Bistra Ilkova, told a roundtable on attracting new issues to the market held in Sofia earlier this week.
“For a long time we have been supporting the idea that the listing of big energy companies like NEK, for example, will bring more liquidity to the market,” Karassimeonov told SeeNews on the sidelines of the roundtable.
“We lack the accelerator which can stir up the market. For foreign investors to come, we need an accelerator,” the board chairman of local Elana Financial Holding, Kamen Kolchev, told the roundtable.
Kolchev added that NEK, or Bulgargaz, or the state-owned minority stakes in electricity distributors can play the role of an accelerator.
The listing of monopolies, however, will hardly happen any time soon because the process takes between six and 12 months to complete. Until this listing becomes fact, the BSE will focus on attracting new issues and raising the liquidity of the market in the hope of bringing back foreign investors. The bourse plans a series of road shows abroad and meetings with potential issuers at home, Karassimeonov said.
News that major world economies are exiting recession and are on their way to recovery, the pick-up of stock markets in the U.S. and Europe in the past couple of months, and the pledge by the Bulgarian government to help the local capital market regain lost ground can be all considered as positive signs, Ilkova said.
“We need new companies to come to the bourse full of energy and many new projects,” she added.
Ilkova believes that Bulgaria's low tax burden, cheap labour force, anti-graft efforts and the unfreezing of EU funds give a clear positive sign to foreign investors.
“We are impatiently waiting for new issuers,” the CEO of pension assurance company POC Doverie , Daniela Petkova, told the roundtable.
Petkova believes that pension funds could play a key role on the local market until foreign investors come back. However, pension funds need good companies worth investing in.
“We can say that we have reached the saturation point already,” she said, adding that currently there is a shortage of investment-worthy stocks on the BSE.
Bulgarian pension funds currently have free cash of around 100-150 milion levs ($75/51.1-$114 million/76.7 million euro) which is waiting to be invested, Petkova said. Clear ownership structure, the quality of management, and good financial results are key when investors decides whether to put their money in stocks, she said.
Bulgarian pension funds' assets currently exceed three billion levs, of which around one billion levs has been invested abroad.
The liquidity of a certain stock and its free float also are very important, said Strahil Vidinov, executive director of pension assurance company POD Allianz Bulgaria.
For newly listed companies "we will look for a free float of at least 20%,” Vidinov said.
Industry officials agreed that it is not the right time for companies to go public now but it is the right moment to prepare to do so.
“The moment is not the best one, a company will not get the best price for its assets but it could start preparations and then find the best time,” said Vasil Velev, chairman of Bulgarian Industrial Capital Association, a lobby group.
“The more developed the market, the better for all,” Vasil Batov, board member of local sunflower seed and grain trader Oliva, told the roundtable.
According to Batov, once foreign investors fail to find attractive investments abroad, they will turn their eyes to emerging capital market like the Bulgarian one.
“Of course, if we have what to offer,” Batov said.
Asked by SeeNews what could be attractive for foreign investors, he replied: “Whatever we are good at – land, agriculture, renewables.”
Bulgaria’s capital market surged to record highs in October-November of 2007. Market capitalisation was equivalent to 55.46% of the country’s gross domestic product at the end of 2007.
The global crisis reduced the share of foreign investors on the Bulgarian stock market to 15% at the end of 2008 from 43% in June 2007. The market hit the bottom in February 2009 and since then it has been trying to recover, albeit very slowly. The BSE's blue-chip SOFIX index, which lost over 80% since its peak in 2007, has regained 23% since the beginning of this year.
(1 euro = 1.95583 Bulgarian levs)
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