All About Money

The Macedonian Stock Switch (MSE) is not running successfully fap turbo. True, some of the parameters which we use to measure the winner of a stock switch have recently improved in the MSE. For representative, the annual money volume has increased together with the number of transactions. But this is a far cry from success fap turbo.

Who is to blame? Is the current direction of the MSE rough?

I do not think so. In Reality, I think the MSE has an superior management team, doing their best to undivided new selling techniques and to list new firms fap turbo. The problems lie elsewhere.

A stock shift is a very serious financial marketplace. It is a highly efficient and visible official document of financing. In the West, it is used to finance most of the takes of potbellies, agency above financing available from banks. Individuals and firms save some of their income and invest it. The stock substitute is meeting grounds for savers wishing to invest their rescues - and firms looking for investments.

Another function of stock converts is to assist governments in financing their internal taking up requirements. Governments trade obligations (called bonds) to investors through the stock shifts in their countries. A stock exchange is, therefore, an indispensable tool for re-financing public debt.

But a few conditions must persist before a stock exchange functions the right way.

The most significant circumstance is the existence of a healthy, 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 growth, a gaping trade and payments shortages. But this is an optical illusion. The economy is in much well conditions that most Macedonians would care to admit. The unemployment figures are tipped. They reflect attempts to evade paying social taxes - not real unemployment. The economy is growing, even by official ideas. The black economy is acquiring even faster. The deficits are covered by extended capital extracts from donor areas. Macedonia is taking more worldwide accredits per capita than Russia. It is perpetually convenient to blame the declining economic climate - but the cold, objective calculates do not bear this out.

When an economy is acquiring - the gains of companies (including those listed in the MSE) will grow with it. This makes the shares of these companies an interesting buy.

Since no one is buying - we must look for the trouble elsewhere.

A prospering stock substitute 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 introduced no new management, ideas or capital to the beleaguered firms which were “transformed”. The market simply does not trust that they were changed. The same somebodies run the same shows under a opposite hat.

Second, such translation violates the concept of Hierarchy, a chain of require.

It blurs the preeminence between labour (workers) and capital (owners). What is wrong with that is that a ship must have a skipper - and only one. Someone must have the confidence and the province. Collective management is no direction at all.

Moreover, innovation change 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 conditions of the workforce - if owners and labourers are one and the same? So, management is polluted by impertinent, non-economic considerations: power struggles amongst groups of workers, social considerations and political ones.

We identified one villain. The other one is high (real) interest rates. When occupy rates are high, three results keep the resuscitation of the stock exchange:

First, firms have high financing expenses (interest payments) - which reduces their benefits. Second, it is not worthwhile to adopt money and to invest in shares.

Third, it is more charming to invest money in bank deposits, yielding high interest rates - than in shares. High pursuit rates are the poison of stock exchanges.

The same is true for low savings rates. If somebodies and firms do not save - there is no capital available for investment in stocks.

This, exactly, is the current position in Macedonia : impossibly high involvement rates coupled with extremely low savings. There is basic misgiving between clients and their banks. They prefer 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 exchange.

Investors must have prompt, accurate and full entropy about the firms that they invest in. This will allow them to react in real time to growings 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 accounting standards. Only lately have the accounting rules in Macedonia been revised to conform to the Western systems of rules of accounting. Even now, the law of similarity is very slight. Macedonian firms maintain a double accounting system. One set of books is tax-driven. It is knowing to show losses or earnings at the whim of the management. An elaborate scheme of hidden reservations lies at the heart of the typical financial arguments of the Macedonian firm. Another set of books - if they are kept at all - reflects reality. This is an enormous barrier to foreign investment - and foreign investors are the driving force in every modern stock change.

The trust of investors in the stock replace is based on legislating to protect their dimension 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 strains.

But legislation without an actual judicial and law enforcement systems is like a stock exchange without money. To enforce dimension 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 perfect from legal codices of other countries (Germany, Britain).

Last - but definitely not least - is the creation of a fair, apparent 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 effective - it must be utterly free of any ulterior considerations and motives. Corruption distorts the market’s allocative mechanisms and powers. It is easy discernible in dealings 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 pillars above all other troubles and it is nearly endemic to Macedonia. It helps to explain much of the predicament of the stock exchange in Skopje. It is the fact that the market is missing its most significant player: the Government.

Investors - both foreign and domestic - look for the Government to be going in the local stock exchange. Governments throughout the world use their stock exchanges to sell shares of state-owned endeavors to their public. The stock exchange becomes a mechanism for the distribution of the national wealth - as embodied by the state owned enterprises - to all the citizens. As we said before, governments also use the stock replace 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 exchange is proof that the government believes in it. Therefore, if it does not operate in the stock exchange - it proves that it does not consider in it. If the government does not believe in the stock exchange in its personalized country - why should the investors believe in it?

There are a few additional structural characteristics which are considered to be the assay-mark of a healthy stock change. 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 investiture options - professionally put, it must be broadened. This will allow the investors to choose 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 exchange can help it by putting in efficient trading techniques, computerized trading and resolution systems 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 substitute 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 changes in the markets of the emerging economies has been an miserable decision in the last three years. Stock changes 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 trading volume there has gone up 10 times since December 1993 - and the market capitalization is up 30 times. But this is because of the performance of the general economy in Slovenia. In Croatia, the government is privatise its holdings in state owned companies by auctioning shares to the public through the Zagreb Stock Exchange. This has availed it a lot.

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