“For the third consecutive year, stock indices on the Belgrade Stock Exchange recorded an increase in value, which remained overshadowed by the continuing trend of declining trading volumes that hit new all-time lows in 2023.”
“A glimmer of optimism has come from the government, which took over the market organizer and announced a new commitment in developing the capital market. The situation on the ground is such that there are no expectations, which could alleviate the burden on investment creators to achieve any kind of result.
The domestic stock market measured by the Belex15 index increased by 6.2% in 2023, largely below competitive regional indices and the most developed global stock exchanges. Admittedly, when weighted by paid dividends, this increase in value would rise to low double-digit rates, which is certainly the best result for local investors since 2016, writes Momentum.
However, it is difficult to talk about earnings on the stock market without taking into account the trading volumes that were below any benchmark level this year. Stock market trading fell to 26.4 million euros (an average of one hundred thousand euros per day), which is almost 40% worse than the year of the pandemic when the market reached rock bottom. This fact alone indicates that the exodus of investors continued this year, while the number of quality investment alternatives dropped to an obscenely low level, even by local standards.
State-owned stock exchange, does it change anything? – After years of wandering by state officials with a strategy for developing the capital market, this year brought concrete outlines – the state took over the Belgrade Stock Exchange and announced the first measures for its development under the auspices of the World Bank. The state has previously had a dominant role – it has enacted regulations, created market material, and regulated the market and its participants, but the effectiveness of all these years has been more than devastating, resulting in a slew of corporate scandals and loss of investor confidence. The key task of participants in the new attempt to build a financial market will be to restore the trust and security that disappeared long ago from the local investment map. The first step in the market’s development that the state and the World Bank have chosen are corporate bonds, which is certainly the least sensitive ground, but it remains a big question whether this lever will be a good enough impetus for market development. In simple terms, can corporate bonds exist in a country without real corporations?
How difficult it will be to create a valid investment environment in the domestic framework is best illustrated by this year’s distribution of profits of the largest and most transparent domestic corporation, Naftna Industrija Srbije (NIS). The state, as the largest minority shareholder, secured itself a dividend twice as high through the payment of a donation it negotiated in a direct deal with the company itself (read, its majority owner). In this way, about 13% of minority shareholders who did not have this privilege enjoyed by the shareholder from Nemanjina Street were legally bypassed. Although this affair probably cannot be nominated among the Top 10 violations of minority shareholder rights, it’s hard to find an investor who didn’t ask the question: if this treatment exists in the largest company where the state is a major minority shareholder, how do small shareholders fare in less visible corporations?
Same rules and equal rights for all market participants, that’s the desire proclaimed by the average investor on the Belgrade Stock Exchange at the dawn of 2024.”
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