gss newsletter...mongolia 38 mongolian parliament to adopt new securities market law 38 mongolian...

GSSNEWSLETTERISSUE 134June 2012

Issue 134, June 2012

2

CoNTENT

Editorial 5

Hr nEws 6

JoHn’s CornEr 7

austria 9CCP.A News 9

BElarus 11National Bank of Belarus plans reform of the Rouble 11National Bank of Belarus decreased Refinancing rate by 2% to 34% 11

Bosnia and HErzEgovina 12Regular revision of indices of the Banja Luka Stock Exchange 12First issue of Federation of Bosnia and Herzegovina Government bonds via public offering 13

Bulgaria 14Newly elected members of Central Depository Board of Directors 14Parliament elected new Deputy Chairman of the Financial Supervision Commission (FSC) 14Simeon Djankov, Minister of Finance, elected Chair of EBRD’s Supervisory Board 15

Croatia 16European Commission: Croatia on right track to membership 16Finance minister says 0.8% growth realistic 16Fitch affirms ratings on four Croatian banks 17

CzECH rEPuBliC 18CNB keeps interest rates unchanged 182011 Annual Report of the Prague Stock Exchange 182011 Annual Report of the Central Securities Depository Prague 19


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Hungary 20Hungary’s state debt projected to cross the Maastricht threshold in 15 years 20

KazaKHstan 22Unified Registrar of Securities took up activity 22

Kyrgyzstan 23Transition of government securities to the stock exchange delayed 23

Poland 24Interest rates hike 24National Depository for Securities streamlines communication with issuers 24

romania 26Stock Exchange: new cross-border connection with Bulgarian Depository available 26Romanian Government to maintain privatisation programme 26Transelectrica turnover increased by almost 18% in Q1 27Communications Ministry still analyzing Romtelecom’s listing 27Economy: National Bank of Romania kept monetary policy rate unchanged at 5.25% 27

russia 28Infrastructure: MICEX-RTS stock exchange to launch premium listing 28KSD and NSD signed Memorandum of Understanding 28MICEX-RTS stock exchange plans to create compensation fund for brokers 28FFMS to toughen requirements for non-government pension funds 29Supervision: FFMS prepared draft law on “Requirements for the code of ethics of the CSD” 29FFMS prepared draft law “On approval of requirements for risk management and internal control of the CSD” 29Legislation: draft amendments to the Civil Code of the Russian Federation approved 30Government considering draft law on tax policy 2013–2015 30

sErBia 31Serbia has voted 31Serbia’s GDP shrinks 1.3% in Q1 2012 32

slovaK rEPuBliC 33Slovak Central Bank publishes banking sector report 33Slovak Central Bank reported loss in 2011 33Bratislava Stock Exchange trading in April 2012 34


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slovEnia 35Corporate Income Tax amended 35Austerity package and revised 2012 budget approved in Parliament 36

uKrainE 36Draft law on Joint-Stock Companies’ Activities drawn up 36

uzBEKistan 37ISIN and CFI identification codes to be set on Uzbek issuers’ securities 37

gEorgia 37National Bank of Georgia decreased its refinancing rate to 6.25% 37

azErBaiJan 37Fitch Ratings agency revised outlook of Azerbaijan’s ratings 37

mongolia 38Mongolian Parliament to adopt new securities market law 38Mongolian Parliament discusses law of investment by foreign state-owned companies in strategic assets 38

your ContaCts 39

disClaimEr 42

imPrint 43


5

EdIToRIaL

Dear Clients, Partners and Friends,It is my pleasure to write for you this month’s editorial. Last year was important for our country, as a new Government was established in December 2011 after several months’ negotiations. Also, new instruments available for trading were issued in 2011 for the first time in both entities – the Federa-tion of Bosnia and Herzegovina (Federation of BiH) and the Republic of Srpska, as we witnessed the primary emission of treasury bills and government bonds.

Furthermore, both entities created and amended important laws shaping the economic landscape of the country: the Republic of Srpska adopted amendments to the Companies Act in 2011 and regulations continued to change in 2012, when amendments to the Law on the Securities Market in the Republic of Srpska were adopted in April 2012. On a similar topic, amendments to the Law on the Securities Market in the Federation of BiH are currently under parliamentary procedure waiting for approval, just as is the new Law on the Take-Over of Companies. Also in 2011, efforts were being made in the Republic of Srpska to modernize capital market regulations and harmonize them with European Union directives.

Still in the Republic of Srpska, amendments to the laws in the field of capital market and the analysis of possibilities for a gradual transformation of closed investment funds into modern forms of functioning (through the Law on Amend-ments to the Law on Investment Funds) will further improve and strengthen the capital market.

The Federation of BiH in 2011 worked on the amendments to the Law on the Securities Market, which is currently undergo-ing parliamentary procedures for approval. This amended law will create a basis for the further development and promotion of the local money and capital market.

Lejla SabljicaHead of Global Securities Services Bosnia and Herzegovina

By issuing treasury bills in the Republic of Srpska the entity’s Government helped the consolidation and further develop-ment of the securities market and financial sector and, in accordance with common international practice of public finance, ensured a new financial instrument for fine-tuning the budget cash-flows, so that the planned budget obligations could be executed in a timely manner.

In the course of 2012, and in accordance with policies of public debt management and long-term intentions related to the development of the money and capital market, the Federation of BiH plans to continue its activities related to the emission and issuance of both short and long-term securities. Amendments to this law will also move in the direction of a further harmonization with the EU provisions regulating this segment of the capital market.

The above-mentioned new issues give domination of bonds and treasury bills over shares on both stock exchanges.

BiH’s sovereign credit endured changes in 2011 and at the beginning of 2012 as well. Ratings assigned by Moody’s Investors Service in May 2011, which had been B2 with negative outlook, were downgraded in April 2012 to B3 / on review for downgrade, while ratings assigned by Standard & Poor’s in November 2011, when it had been on B / On Watch Negative, were improved to B /stable outlook.

The year 2011 and the beginning of 2012 were marked by the 10th anniversary of the payment system in Bosnia and Herzegovina and the completion of the first trades on the local capital market. January 5, 2011 was the 10th anniversary of the reform of the payment system in BiH, which had been con-ducted in record time in 2001. At the beginning of 2012, both stock exchanges - the Sarajevo Stock Exchange and Banja Luka Stock Exchange - celebrated their first 10 years since the completion of the first trade. On April 12, 2002 the first transaction was executed on the Sarajevo Stock exchange, while on March 14, 2002, the first transactions were closed at the Banja Luka Stock Exchange, which marked the start of trading with securities in the Republic of Srpska.

We will continue to keep you informed about ongoing market changes and further developments. The GSS Bosnia wishes you a pleasant reading of the new issue of the GSS News-letter.

Kind regards,

Lejla SabljicaHead of GSS Bosnia and Herzegovina


6 HR News

HR NEWS

Dear Clients, It is our great pleasure to announce the appointment of Eve-lyne Wininger to the position of Global Relationship Manager within GSS.

Evelyne will supplement the strengths of the current team by bringing with her an extensive background of Relationship Management skills most recently exercised in her position as a Relationship Manager within Cash Management Global Business (part of the GTB division in Vienna).

With over 20 years’ experience in the UniCredit family, Eve-lyne’s background includes positions in Domestic Credit Risk, as a RM for multinational corporates and, in her longest appointment so far, as a Global Senior Relationship Man-ager (GAM) for international corporates in Austria, Germany, France, Scandinavia and the US.

In this role she has been able to gain a comprehensive over-view on various product areas which include credit, leasing, deposits, equity and M&A. With this broad understanding of the product palette and, in the ever-increasing client demand for x-sell opportunities within the same group, her under-standing of the ‘broader picture’ brings great value in an ever-changing environment; value which not only benefits GSS as a whole, but which clients seek and appreciate.

We look forward to having Evelyne on board and wish her all the best for her new responsibility!

Tomasz Grajewski Sven TrahanManaging Director Managing DirectorGlobal Head of GSS Head of Global Sales and Relationship Management

Evelyne Wininger Global Relationship Manager GSS


7

JoHN’S CoRNER

John Gubert calls for a different approach to regulation

For some time, I have criticised the quantum and com-plexity of regulation. I now feel somewhat beleaguered, post the announcement of losses on hedging transactions at a major US bank. After all, many in the US are stressing the need for the Volcker rule to avoid such risks. Others even think that somehow trading should be done away with for the benefit of all mankind.

I am not sure if the Volcker rule would have voided the posi-tion – it appears to have been a hedge and not a pure pro-prietary trade. The latter is the focus of the Volcker rule. And I doubt that the abolitionists realise that trading in securities does benefit society. The problem is we are moving, in society generally, towards rigid definitions of right and wrong. Real life, even in banking, is much more complicated.

First of all I should be clear that I believe in strong regulation. The problem today is that we do not have that, we have cha-otic regulation. Any global firm is regulated functionally and geographically, across similar products, by different regulators depending on the organisation structure of the firm. Chaotic regulation means that certain actions are permitted in some businesses and not others (i.e. the controls on the shadow banking sector are non-existent whilst those on mainstream banking have proliferated). Chaotic regulation means capital requirements, both in quantum and in computation, vary according to the geography of the regulated body (i.e. the planned diverse application of Basel 3).

The regulation the market needs is not more regulation but less regulation, clear regulation and applied regulation. Looking back at all the major problems of the finance industry of the last decade, none were caused by lack of regulation. They are mainly attributable to non-compliance with regula-tion or failure to follow the simplest of risk management rules.

Madoff was regulated, audited and approved; regulation failed, perhaps for understandable reasons, to identify that the funds were a Ponzi scheme. Long Term Capital Man-agement collapsed in the late 90’s due to two fundamental errors – excess leverage and a belief that 99.9 per cent plus certainty meant total certainty. Those two elements were behind the collapse of Lehman, Bear Stearns and several commercial banks a decade or so later. The regulatory struc-ture was often there to take action but no action was taken.

And the collapse of markets is not driven by hedge funds and proprietary traders. There are issues in respect of trading, but the fundamental cause of market crashes is not weight of money but unsound economic fundamentals. Where organisations corner markets (and attempts have been more common in commodities – tin, copper, silver – than financial markets), there is high risk and, in many cases, substantial loss as the perpetrators sought to unwind their long or short positions. If substantial positions are built up and then mar-kets moved by associated rumour, there are regulations in place to take remedial action. Insider trading is also illegal. If markets are concerned that certain types of programme or high frequency trading could create false markets, there are easy ways, through most existing rulebooks, of taking action.

Trading has value as it creates liquidity. If there is no liquidity, issues would be at higher prices or higher yields. Corporates and Governments would pay premiums for funds. All appreciate that is not a good scenario; yet no one has yet identified an alternative way of ensuring liquidity.


8 JOHN’S CORNER

It is possible that some believe in introducing restrictions to calm down markets. Unfortunately, all empirical evidence sug-gests that trading (which by definition is two way) is not the main cause of volatility. The main reason for market volatility is uncertainty in high risk periods or event risk (both positive and negative).

A recent review of the much maligned hedge fund market by the UK Financial Services Authority stated that “ the foot-print of hedge funds within markets is generally small, when measured by the value of their exposures and by turnover, suggesting that, in aggregate, hedge funds do not have a major presence in most markets.”

The report, it is true, states that they do have a major footprint in convertible bonds, interest rate derivatives and commod-ity derivatives. However, the biggest risk mentioned was not leverage (around 2.5 times). It was not credit (average prime brokerage margin requirements are ten percentage points higher than pre-Lehman and excess collateral is near an all-time peak at 100% of the base margin required). The biggest risk was one shared with long only funds; liquidity risk in the event of material concurrent investor liquidations.

Paradoxically hedge funds, with their sophisticated inves-tor base, can adopt liquidation firewalls much more easily than large retail funds.

As in all markets, a careful analysis is needed of the cause of risk. Otherwise more regulation will increase the cost of compliance without reducing the risk to investors. And on the trading side, regulators and legislators should be wary that an unintended consequence of their action is not reduced liquid-ity and increased cost of borrowing for governments and all.

John GubertChairman Global Securities Services Executive Committee UniCredit


9

Austria

Market Capitalisation HRK 397.2 bnYTD Dev. of Market Capitalisation 2.307Number of SE Transactions p.m. 96000YTD Dev. of SE Transactions 7.107SE Turnover (Zagreb SE) HRK 5977.5 mnMonthly Index Performance (Crobex/ZSE) 0.017GDP per Capita (2012e in EUR) 36,650GDP Real 2012e (Change against prev. year in %) 0.83-Month Money Market Rate (current in %) 0.60Inflation in 2012e (yearly average in %) 2.2.../EUR -Upcoming Holidays none

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5/24/2012 12:46 PM

Market Capitalisation EUR 71.4bn

YTD Dev. of Market Capitalisation 8.4%

Number of SE Transactions p.m. n.a.

YTD Dev. of SE Transactions n.a.

SE Turnover (Vienna SE) EUR 1.5bn

Monthly Index Performance (ATX/VSE) -1.9%

GDP per Capita (2012 in EUR) 36,650

GDP Real 2012 (Change against prev. year in %) 0.8

3-Month Money Market Rate (current in %) 0.60

Inflation in 2012 (HVPI yearly average in %) 2.2

Upcoming Holidays 7 June

Source: Thomson Datastream

Source: UniCredit, National Statistics

ATX

aUSTRIa

CCP.A news

1. Implementation of the new CCP.A fee schedule

As announced by OeKB, the final delivery of the new cash market clearing solution has been postponed due to a delay on the software vendor’s side. The new go-live day will be announced in July after the first tests have been performed successfully. Currently the expected implementation date is mid-October 2012.

Due to this delay CCP.A’s management decided to postpone the implementation of the new fee schedule until the suc-cessful go-live of the new clearing system for the Vienna cash market.

2. Annual credit assessment

For the credit assessments and adjustment of the risk pre-miums for all participating clearing members the following information and documents have to be provided by June 30, 2012 at the latest:

■■ audited financial statements for 2011 (including notes and management report)

■■ information on the shareholder structure (if there were changes to the last information provided):

■■ owners’ and size of stake held ■■ information on consolidated companies ■■ organisation charts illustrating the corporate inte-

gration ■■ profit and loss transfer agreements

■■ current rating reports

3. CCP.A clearing rules

In consequence to the introduction of the new cash market clearing system CCP.A has drafted amendments on the new functionalities and process adjustments and submitted them to FMA at the end of March for consultation together with the already discussed amendments relating to the stop-button. Once FMA will have agreed on the proposed amendments, CCP.A will file them for official approval. The new clearing rules shall become effective with the implementation of the new cash market clearing system.


10 Austria

Written and edited by: Thomas Rosmanitz Head of Relationship Management Austria Global Securities Services, AustriaTel. +43 50505 58515 · [email protected]

4. CCP.A member meeting

The next CCP.A member meeting will be held in September 2012, the exact date will be announced in due time.

5. Clearing trainings

The next regular CCP.A clearing training will take place in September 2012. The exact dates will be co-ordinated with the dates of the new clearing system trainings in order to enable clearing members to attend both – the general CCP.A clearing training and the technical training on the new clear-ing system.

Additional dates for clearing trainings will be offered on demand – in Vienna as well as in-house. (Contact: [email protected])

6. European Market Infrastructure Regulation / ESMA

EMIR has been approved by the European Council on March 20, 2012 and will be published in the official journal in July 2012. EMIR will enter into force in August 2012. The authorisation process will last until June 2013.

The guidelines for ESMA’s level 2 technical standards are expected to be submitted to the EU Commission by Septem-ber 2012 and to become effective by the end of 2012. ESMA will publish the final draft for consultation presumably in June.

7. Basel III

No agreement was reached during the ECOFIN meeting on May, 2; the next meeting was scheduled for May 15, 2012, where the consultations on the adoption of Basel 3 were continued and unanimous agreement was reached on a general approach on two proposals – the so-called “CRD 4” package – amending the EU’s rules on capital requirements for banks and investment firms, with a view to negotiations with the European Parliament.

Source: CCP.A

Impact on investors For Information purposes only.


11

Market Capitalisation BYR 8.4bn

YTD Dev. of Market Capitalisation n.a.

Number of SE Transactions p.m. (BCSE) 1,489

YTD Dev. of SE Transactions -22.2%

SE Turnover (BCSE) BYR 2,032bn

Monthly Index Performance (BCSE) 0.3%

GDP per Capita (2012 in EUR) 358


3-Month Money Market Rate (current in %) n.a.

Inflation in 2012 (yearly average in %) 5.1

BYR/EUR 0.00010

Upcoming Holidays none


BELaRUS

National Bank of Belarus plans reform of the RubleThe National Bank of Belarus plans to start preparations for the reform of the national currency in 2013. According to the CEO of the National Bank of Belarus the exact date of the currency reform is currently not available.

The National Bank of Belarus reported to keep as priority fur-ther measures to limit inflation to the planned level of 19-22%.

Impact on investors For information purposes only.

National Bank of Belarus decreases refinancing rate by 2% to 34%Starting from May 16, 2012 the National Bank of Belarus decreased its refinancing rate by 2% to 34%. The decision was accepted with the intention of decreasing the inflation rate between January and April, which was 6.8 % and which is in conformity with the planned level of 19-22% per year.

Impact on investors The stabilisation of the Belarus economy is lead by positive trends.

Written and edited by: Evgenia Klimova Head of Product and Business Development Global Securities Services, RussiaTel. +7 495 232 5298 · [email protected]


12

Source: Bloomberg

BoSNIa aNd HERzEGovINa


Bosnia_Herzegovina

Market Capitalisation HRK 397.2 bnYTD Dev. of Market Capitalisation 2.307Number of SE Transactions p.m. 96000YTD Dev. of SE Transactions 7.107SE Turnover (Zagreb SE) HRK 5977.5 mnMonthly Index Performance (Crobex/ZSE) 0.017GDP per Capita (2012e in EUR) 3,577GDP Real 2012e (Change against prev. year in %) 2.53-Month Money Market Rate (current in %) -Inflation in 2012e (yearly average in %) 2.6BAM/EUR 1.96Upcoming Holidays none

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5/24/2012 12:46 PM

BIFX

Regular index revision on the Banja Luka Stock ExchangeIn line with the Methodology for the Establishment, Calculation and Revision of the Indices the Commission for the Estab-lishment and Revision of the Banja Luka Stock Exchange Indices has conducted its 16th regular revision of the BIRS and FIRS, as well as the 12th regular revision of the ERS10.

The BIRS has decreased by 18.93% in the period from May 1, 2004 (the start of calculation) to May 18, 2012. The BIRS value amounted to 810.70 points on May 18, 2012. Analyzing the BLSE trading data in the period from November 1, 2011 to April 30, 2012, the Commission in accordance with the Methodology decided that all twenty issuers, whose stocks are included in the BIRS, continue to fulfil the criteria to be included in the BIRS as defined by the Methodology.

As foreseen by the Methodology, regular revisions are con-ducted on the basis of trading data from the six-month period that ends on the last day of month that precedes the revi-sion. The FIRS has increased by 78.27% in the period from 1 August 2004 (the start of calculation) to 18 May 2012. The value of FIRS amounted to 1,782.68 points on May 18 2012. The composition of FIRS has not changed since all stocks continue to fulfil the criteria set by the Methodology.

The ERS10 has decreased by 19.75% in the period from June 1, 2006 (the start of calculation) to May 18, 2012. The value of ERS10 amounted to 802.55 points on May 18, 2012. The composition of ERS10 has not been changed since all stocks continue to fulfil the criteria foreseen by the Methodology.

Source: Banja Luka Stock Exchange

Impact on investors Companies included in indices FIRS, BIRS and ERS10 have not been altered.

Market Capitalisation (Sarajevo SE) BAM 4.4bn

YTD Dev. of Market Capitalisation -0.1%

Number of SE Transactions p.m. 926


SE Turnover (SASE) BAM 20.6mn

Monthly Index Performance (SASX-10/SASE) -1.3%

Market Capitalisation (Banja Luka SE) BAM 3.7bn


Number of SE Transactions p.m. 1,736


SE Turnover (BLSE) BAM 33.8mn

Monthly Index Performance (BIRS/BLSE) -0.7%





EUR/BAM 1.96


May


13 Bosnia and Herzegovina

First issue of Federation of Bosnia and Herzegovina government bonds via public offering The Federal Ministry of Finance issued a public invitation for participation in the first issue of government bonds of the Federation of Bosnia and Herzegovina. The public auction has been conducted at the Sarajevo Stock Exchange on May 29, 2012. The issue, which is expected to have a volume of BAM 80 million, has a maturity of 3 years and will pay inter-est semi-annually.

Written and edited by: Amra Telac evic Relationship Manager Global Securities Services, Bosnia and Herzegovina Tel. +387 33 491 816 · [email protected]

The Federal Government adopted a decision in late April on the issue of bonds in order to raise funds to finance expen-ditures established by the budget for 2012 in the nominal amount of BAM 130 million.

Impact on investors A new type of security is now available in the Federation of BiH.


14

Market Capitalisation BGN 12.4bn



YTD Dev. of SE Transactions 52.6%

SE Turnover (Bulgarian Stock Exchange) BGN 183.1mn

Monthly Index Performance (SOFIX) -6.5%





EUR/BGN 1.96


BULGaRIa



Bulgaria

Market Capitalisation HRK 397.2 bnYTD Dev. of Market Capitalisation 2.307Number of SE Transactions p.m. 96000YTD Dev. of SE Transactions 7.107SE Turnover (Zagreb SE) HRK 5977.5 mnMonthly Index Performance (Crobex/ZSE) 0.017GDP per Capita (2012e in EUR) 5,434GDP Real 2012e (Change against prev. year in %) 3.53-Month Money Market Rate (current in %) 2.55Inflation in 2012e (yearly average in %) 3.3EUR/BGN 1.96Upcoming Holidays none

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5/24/2012 12:46 PM

SOFIX

Central Depository’s Board of Directors newly electedAt an Extraordinary General Meeting of the Central Depository held on May 21, 2012, four new members of the Board of Directors were elected: Mr Apostol Apostolov, Chairman of Teximbank’s Supervisory Board, Mr Ivan Takev, CEO of the Bulgarian Stock Exchange-Sofia, Angel Rabadzhiyski, CEO of Karoll Investment Intermediary, and Ms Teodora Angelova. Mr Vasil Golemnaski, hitherto existing member of Central Depository’s Board of Directors and CEO of the Bulgarian Stock Exchange-Sofia, remains member of Central Deposi-tory’s new management.

“The new Management is to actively endeavour for the attain-ment of cross-border clearing and settlement, the introduc-tion of a new information system of the Depository, and the compliance of services provided by the Central Depository with internationally recognised practices. Of course, the pri-mary objective is the bundle privatisation of the Depository and Bulgarian Stock Exchange, which is envisaged to be finalised by the year’s end,” said Mr Vasil Golemanski.

The General Meeting discharged the other hitherto existing members of the Board of Directors due to the expiration of their mandate. The mandate of the new management of the Central Depository is for a period of five years.

Impact on investors The new management is expected to take further steps towards the privatisation of the Depository and Bulgarian Stock Exchange.

Parliament elected new Deputy Chairman of the Financial Supervision Commission (FSC)On May 22, 2012 the National Assembly of the Republic of Bulgaria unanimously elected the new deputy chairman of the Financial Supervision Commission – Mr. Nikolay Popov. He will be responsible for the Investment Supervision Divi-sion at the FSC.

Before his election, Mr. Popov held the positions of Chief Secretary to the Commission. Previously, he developed his career as Chief tax inspector, Executive Director of the National Revenue Agency (NRA), financial manager of “Festa Holding”, and managing administrative affairs of “Alfa Finance Holding” AD in Macedonia. He was a Board member of the NRA; member of the Management Board and participant in the Meetings of Representatives of the National Health Insur-ance Fund, Member of the Supervisory Board of the National Insurance Institute and a member of the Executive Board and participant in the General Assembly of the Indo-European Organization of Tax Administrations (IOTA).

May


15 Bulgaria

Nikolay Popov was proposed for the position by the FSC’s Chairman – Mr. Stoyan Mavrodiev. In his official speech to the National Assembly on the proposal Mr. Mavrodiev said: “I am convinced and I guarantee that Mr. Nikolay Popov will contribute with his professionalism and personal qualities to the successful realization of the goals and objectives that the Commission as a state institution responsible for supervision and regulation of the non-banking financial organizations must implement.”


Simeon Djankov, Minister of Finance, elected Chair of EBRD’s Supervisory BoardSimeon Djankov is the first Minister of Finance of a country from the former socialist bloc who has been elected chair of the Supervisory Board of the European Bank for Reconstruc-tion and Development (EBRD) since the bank was established in 1991.

A number of finance ministers at this position have continued their political and career development: Christine Lagarde, Managing Director of the International Monetary Fund, Philippe Maystadt, President of EIB, Sauli Niinistö, President of Finland, as well as Lamberto Dini, former Prime Minister of Italy, and Gordon Brown, former Prime Minister of the UK.

Austrian Minister of Finance Maria Fekter, who had chaired the Supervisory Board thus far, expressed her gratitude for Bulgaria’s active participation in the work of the 21st General Assembly. She congratulated the Deputy Prime Minister and Minister of Finance Simeon Djankov on his election and said this was a new step in the Bank’s development. It is for the first time that this position is taken by a representative from a country in which the Bank has active projects, she said in her address.

Finance Minister Simeon Djankov will hold at this position until the next annual EBRD meeting in 2013 to be held in Turkey. Each member country of the financial institution has a member in the Bank’s Supervisory Board. The chair of the Supervisory Board and its members do not receive any remuneration from the Bank for fulfilling their functions.

Impact on investors Strengthening Bulgaria’s position as EU member with favourable investment climate and prospective.

Written and edited by: Veselin Stefanov Head of Global Securities Services Global Securities Services, BulgariaTel. +359 2 923 2818 · [email protected]


16

CRoaTIa

Market Capitalisation HRK 186.2bn




SE Turnover (Zagreb SE) HRK 330.3mn

Monthly Index Performance (Crobex/ZSE) -1.8%





EUR/HRK 7.58




Croatia

Market Capitalisation HRK 397.2 bnYTD Dev. of Market Capitalisation 2.307Number of SE Transactions p.m. 96000YTD Dev. of SE Transactions 7.107SE Turnover (Zagreb SE) HRK 5977.5 mnMonthly Index Performance (Crobex/ZSE) 0.017GDP per Capita (2012e in EUR) 11,160GDP Real 2012e (Change against prev. year in %) 2.03-Month Money Market Rate (current in %) 2.3Inflation in 2012e (yearly average in %) 2.8EUR/HRK 7.58Upcoming Holidays none

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5/24/2012 12:46 PM

CROBEX

European Commission says Croatia on right track to membershipThe first monitoring report on Croatia’s accession prepara-tions gave an overall assessment of the level of preparedness and provided recommendations to the Government what to do by July 1, 2013 to make the country ready for full mem-bership of the European Union.

“Overall, Croatia’s preparations for EU membership are on track. Croatia has reached a considerable degree of align-ment with the acquis,” the report said and added that “the Commission has identified a limited number of issues requir-ing further efforts. The Croatian authorities need to take all necessary measures to ensure that the country is fully pre-pared for membership by July 1, 2013, in the interest of Croatia and the EU.”

This was the first such report, covering the period from Sep-tember 1, 2011 to February 29, 2012 and highlighting the areas where further efforts were necessary in order for Croatia to be fully ready for membership on July 1, 2013.

Impact on investors Croatia has reached a considerable degree of alignment with the acquis communautaire.

Finance minister says 0.8% growth realistic Growth of 0.8% this year is realistic and the Government will show that it was right, Finance Minister Slavko Linic said.

The Government’s programme points into one direction: to cut spending and be disciplined in spending the budget, while increasing investments and revenues. Before the end of the term, the budget will be in the black, which means that we will no longer have to borrow and will start thinking about paying back the loans, said Linic.

Asked if reforms would include bringing order to public com-panies and layoffs, or layoffs in the state administration, he said there would be both.

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17 Croatia

“Public companies always come first, because they must ensure their own funds for investments, not only through loans. Investments mean jobs, which means that we simply must reduce all the irrationalities we inherited, namely too many employees. The same goes for the state administration, but when it comes to it, it is more important how to turn to investors, be efficient in dealing with their demands, how to deal with health and education.”

Linic said a good number of management boards had been changed, plans and programmes had been drawn up, and that a series of tenders was expected in May. He expects works to begin in June, which he said meant the hiring of both construction companies and those selling equipment.

That will result in 0.8% growth. “That’s realistic because those are state and feasible investments”, concludes Linic.


Fitch affirms ratings on four Croatian banks Fitch Ratings has affirmed the ratings on Croatian banks Zagrebacka Banka, Privredna Banka Zagreb, Erste&Steiermärkische Bank and Societe Generale-Splitska Banka, noting that the banks’ foreign owners continued to be interested in doing business in Central and Eastern Europe.

Zagrebacka Banka’s long-term Issuer Default Rating (IDR) has been affirmed at “BBB+”, with a negative outlook, while the support ratings on the other three banks have been affirmed at “2”.

“ZABA’s IDRs are based on the still high probability of poten-tial support from its ultimate shareholder, UniCredit S.p.A. In Fitch’s view, if needed, support for Zagrebacka Banka would primarily come from UniCredit via UniCredit Bank Austria AG, which owns 84.47% of Zagrebacka Banka”, the statement said.

“In Fitch’s opinion, each of the parent banks remain commit-ted to the CEE region, although they are adopting a more prudent and selective approach to growth and in some cases taking measures to make subsidiaries more self-sufficient in terms of funding”, the agency said.

“The banks’ support ratings could be downgraded in case of a multi-notch downgrade of the parent banks’ long-term IDRs, indicating a reduced ability to support the subsidiaries, which Fitch does not expect,” the agency said.


Written and edited by: Snjez ana Brunc ic Relationship Manager Global Securities Services, CroatiaTel. +385 1 630 5400 · [email protected]


18

Market Capitalisation CZK 1.1trn


Number of SE Transactions p.m. n.a.

YTD Dev. of SE Transactions n.a.

SE Turnover (Prague SE) CZK 65.0bn

Monthly Index Performance (PX) -3.5%





EUR/CZK 25.37

Upcoming Holidays 7, 22, 25 June


CzECH REPUBLIC


Czech

Market Capitalisation HRK 397.2 bnYTD Dev. of Market Capitalisation 2.307Number of SE Transactions p.m. 96000YTD Dev. of SE Transactions 7.107SE Turnover (Zagreb SE) HRK 5977.5 mnMonthly Index Performance (Crobex/ZSE) 0.017GDP per Capita (2012e in EUR) 15,901GDP Real 2012e (Change against prev. year in %) 3.33-Month Money Market Rate (current in %) 1.08Inflation in 2012e (yearly average in %) 2.4EUR/CZK 25.37Upcoming Holidays none

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5/24/2012 12:46 PM

PX-50

CNB keeps interest rates unchangedThe CNB Bank Board decided at its meeting to keep interest rates unchanged. The two-week repo rate was maintained at 0.75%, the discount rate at 0.25% and the Lombard rate at 1.75%.

A definition of the above indicators, their history, as well as the CNB Board minutes are available on the Bank’s website (Section Monetary Policy).

Source: CNB


2011 Annual Report of the Prague Stock ExchangeLike all international stock exchanges, the Prague Stock Exchange (PSE) experienced the third year of massive market turbulence in 2011. Although the core business of the stock exchange was under severe pressure, PSE was able to attain the budgeted results. This was mainly due to the exchange’s strategy of diversifying revenues across more business lines and tight cost control.

The Prague Stock Exchange now offers securities trading, securities clearing, settlement, OTC settlement, safe custody, issuer registration and services, data vending, commodity derivatives trading as well as clearing and settlement. Each of these product lines represents an almost equal share of the exchange’s revenues.

PSE will work on the further development of the different product lines to achieve even greater synergies on the cost side and will also focus on the various client groups with the aim of increasing cross-selling. Activities may include setting up new lines of business or discontinuing operations that are not performing.

May


19 CZECH REPUBLIC

As usual, the Prague Stock Exchange concentrated the main thrust of its efforts on systems projects in 2011. The major task was the consolidation of the PX Group after the acquisitions of the Prague Securities Centre in 2010 and the creation of the Central Securities Depository Prague. PSE had to tackle many challenges in securities registration as the business model of the old depository, dating back to the mid-1990s, was already outdated. Many further moderniza-tion measures are planned to be carried out in 2012.

For 2012, it is planned to finish the implementation of CEESEG’s common trading platform Xetra at the Prague Stock Exchange and to introduce cross membership as well as to offer the trading members of the Prague Stock Exchange standard European clearing mechanisms.

The Annual Report of the Prague Stock Exchange for the year 2011 is available on the PSE’s web page.

Source: Prague Stock Exchange


Written and edited by: Zbynek Oborny Relationship Manager Global Securities Services, Czech RepublicTel. +420 955 960 779 · [email protected]

2011 Annual Report of the Central Securities Depository Prague

Highlights from the Report:

■■ CSDP signed an agreement on reciprocal membership and cooperation with the Central Securities Depository of the Slovak Republic (Centrálny depozitár cenných pa-pierov Slovenskej republiky, a.s.) in Bratislava. The linking of the two institutions will simplify trading in the same securities in Prague and Bratislava.

■■ CSDP’s Endowment Fund commenced operations and began through its representatives to conclude donation contracts for dematerialized securities maintained in the Central Depository’s register.

■■ EQUILOR ZRt became a new member of CSDP and its settlement system.

■■ For retail investors, the subscription period for state sav-ings bonds issued by the Czech Republic was initiated. CSDP assisted in the birth of this new source of state debt financing and closely cooperated with the Czech Ministry of Finance on its enablement.

■■ IPOPEMA Securities S.A. became a new member of CSDP and its settlement system.

■■ CSDP recorded contracts concluded on maintaining reg-isters for 1,656 issues, 186 contracts with notaries and 22 contracts with insolvency administrators on acquiring information from its register via the Information Service Broker (ISB).

The Annual Report of the Central Securities Depository Prague for the year 2011 is available on the CDCP’s web pages.

Source: Central Securities Depository Prague


mailto:[email protected]


20

Market Capitalisation HUF 16,212.0bn




SE Turnover (Budapest SE) HUF 332,272.5mn

Monthly Index Performance (BUX) -1.9%





EUR/HUF 298.87



HUNGaRy


Hungary

Market Capitalisation HRK 397.2 bnYTD Dev. of Market Capitalisation 2.307Number of SE Transactions p.m. 96000YTD Dev. of SE Transactions 7.107SE Turnover (Zagreb SE) HRK 5977.5 mnMonthly Index Performance (Crobex/ZSE) 0.017GDP per Capita (2012e in EUR) 11,140GDP Real 2012e (Change against prev. year in %) 3.43-Month Money Market Rate (current in %) 5.70Inflation in 2012e (yearly average in %) 3.4EUR/HUF 298.87Upcoming Holidays none

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5/24/2012 12:46 PM

BUX

Hungary’s state debt projected to cross the Maastricht threshold in 15 yearsIn mid May, both the National Bank of Hungary (NBH) and the European Commission (EC) published forecasts on Hun-gary’s important indicators such as the state debt and the budget deficit.

NBH Governor András Simor’s analysis specifically states that Hungary’s state dept could possibly fall under the Maas-tricht threshold of 60% (of the GDP) by 2026, though it is unlikely it could hit the 50% criteria set by the Constitution. From the 80.6% in the end of 2011, in the NBH’s view a significant decrease to 59.4% would be a realistic target by 2026. In order to get there though, higher sustained levels of growth, government actions aimed at strengthening investor confidence, improvements in the fiscal balance and reduced cost of debt financing will be the key factors according to the report.

It stipulates though that the general government balance already shows a trend improvement and expected to stabilize around 2% in the long term. The projection is based on a long-term growth rate of 2.5%, which is exceeded by the cost of debt servicing by 0.8%. Nevertheless, the primary balance would be sufficient to offset the debt augmenting effect of debt servicing, thus ensuring a decline in the debt-to-GDP ratio, according to the analysis.

In terms of the latter, the NBH report seems to be in line with the EC’s forecast which sets Hungary’s deficit under the 3% threshold as well, already for 2012 and 2013. They project a 2.5% deficit, lower than the earlier estimate of 2.8% for this year, and 2.9% for 2013. The 2012 forecast corresponds even with Hungary’s target submitted to Brussels in the Con-vergence Programme (2.5%), but in terms of the next year, Hungary’s one is a bit more optimistic with its 2.2%.

The improved projections can mainly be attributed to further savings adopted in the 2012 budget, which resulted in a better than expected 2012 budget balance, added the EC, but they also took note of deteriorating growth prospects and higher interest expenditures. The EC acknowledged that the new wave of transfers from the private to the state pension pillar have a revenue-increasing impact.

May


21 Hungary

In terms of the state dept, 78.5% and 78% of the GDP were projected by the EC report for 2012 and 2013, respectively. The EC’s report did not refer to such long term targets as the date of fulfilling the Maastricht criteria.

The report expects Hungary’s economy to contract by 0.3% in 2012 but already for 2013 it forecasts a 1% growth. They see ’no recovery in sight’ for domestic demand any day soon as the tax on financial transactions, approved days earlier by the government but not yet entered into force, would weigh on consumption next year. It added that big invest-ments already scheduled in the automotive industry could contribute positively, such as the German carmaker Daimler starting production in its plant in Hungary in April 2012 or the capacity expansions at the local units of Audi and Opel.

In terms of the remaining indicators, such as inflation, the EC expects an increased 5.5% this year, which they assume will go down to 3.9% in 2013, while the unemployment rate is forecasted to drop down to 10.6% in 2012 and fall to 9.6% in 2013.

Impact on investors Both the European Commission and the National Bank of Hungary issued an updated analysis on Hungary’s key economic indicators, highlighting the importance of boost-ing investors’ confidence – among others – in order to reach the projected figures.

Written and edited by: Ágnes Temesvári Relationship Manager Global Securities Services, HungaryTel.: +36 1 301 1838 · [email protected]



22

Market Capitalisation KZT 12,029.4bn




SE Turnover (KASE) KZT 12.2bn

Monthly Index Performance (KASE) 1,163.4





EUR/KZT 185.73


Source: Bloomberg

KazaKHSTaN


Kazakhstan

Market Capitalisation HRK 397.2 bnYTD Dev. of Market Capitalisation 2.307Number of SE Transactions p.m. 96000YTD Dev. of SE Transactions 7.107SE Turnover (Zagreb SE) HRK 5977.5 mnMonthly Index Performance (Crobex/ZSE) 0.017GDP per Capita (2012e in EUR) 7,608GDP Real 2012e (Change against prev. year in %) 5.53-Month Money Market Rate (current in %) 1.85Inflation in 2012e (yearly average in %) 7.1EUR/KZT 185.73Upcoming Holidays none

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5/24/2012 12:46 PM

KASE

Unified Registrar of Securities took up activityIn accordance with the “Law of the Republic of Kazakhstan on Risk Minimization of Financial Institutions” and with the “Financial Market and Securities Market Law”, JSC Unified Registrar of Securities will be the only organisation on the territory of Kazakhstan carrying out the activity of keeping a register of securities holders.

During 2012, in accordance with the regulations of the author-ised body, acting registrars will transfer to Unified Registrar of Securities the documents and records which make up the system of the securities holders’ registry.

Impact on investors The improvement of the legislative framework shall decrease investment risks and provide stability of financial institutions and the financial system in Kazakhstan.


May


23

KyRGyzSTaN

Market Capitalisation KGS 6,024.0mn

YTD Dev. of Market Capitalisation n.a.

Number of SE Transactions p.m. 71


SE Turnover (KSE) KGS 2.4mn

Monthly Index Performance (KSE) 172.9

GDP per Capita (2012 in EUR) 744.28

GDP Real 2012 (Change against prev. year in %) n.a.



EUR/KGS 60.54



Transition of government securities to the stock exchange delayedThe previously announced transition of government securities to the “Kyrgyz Stock Exchange” is delayed by 3 – 4 months due to amendments to the scheme for the circulation of securities . With the exception of reverse repo, according to the directive the 3-months government treasury promissory notes and 24-months government treasury bonds should have been circulating on the stock exchange.

The Central Depository was supposed to provide services with regard to keeping the government securities holders’ registry and accounting of the securities transactions. But further in accordance with the International Monetary Fund’s recommendations, the Central Depository was excluded from the settlement scheme in order to keep the process within the government entity – the National Bank of Kyrgyzstan.

The Stock Exchange reported that the project launch is post-poned for the period required for creating and approving a new and amended scheme.

Impact on investors The delay in investment possibilities is widening on the Kyrgyz market.



24

Market Capitalisation PLN 477.5bn




SE Turnover (WSE) PLN 13.8bn

Monthly Index Performance (WIG20) -2.0%

Monthly Index Performance (WIG) -2.4%





EUR/PLN 4.34



PoLaNd


Poland

Market Capitalisation HRK 397.2 bnYTD Dev. of Market Capitalisation 2.307Number of SE Transactions p.m. 96000YTD Dev. of SE Transactions 7.107SE Turnover (Zagreb SE) HRK 5977.5 mnMonthly Index Performance (Crobex/ZSE) 0.017GDP per Capita (2012e in EUR) 11,027GDP Real 2012e (Change against prev. year in %) 3.93-Month Money Market Rate (current in %) 4.97Inflation in 2012e (yearly average in %) 3.7EUR/PLN 4.34Upcoming Holidays none

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5/24/2012 12:46 PM

WIG-20

Interest rates hikeFollowing the monthly meeting of the Monetary Policy Council held on May 8 and 9, 2012 it has been decided that all NBP rates would be increased by 0.25 bps. Starting from May 10, 2012 the NBP rates are thus set at the below levels:

Reference rate: 4.75%Rediscount rate: 5.00%Lombard rate: 6.25%Deposit Rate: 3.25%

Impact on investors All interest rates that are linked to official rates of the National Bank of Poland have been amended with effect of May 10, 2012.

National Depository for Securities streamlines communication with issuersThe National Depository for Securities (NDS) has recently announced that it is implementing changes to its communi-cation channels with local issuers, offering them a new pos-sibility to send all data concerning entitlements from issued securities via a dedicated, secured, online application. The application, which is accessible to a restricted catalogue of issuers, had already been used for processing the registration for shareholder meetings (meeting announcements, provision of list of shareholders, etc).

Starting from May 14, 2012 the application will also be used for dividend payments, interest income payments, redemp-tion of bonds and bills, as well as for payments done by close-ended investment funds.

Thanks to the change, issuers will not only have the possibility to send information about record and pay dates or agreed interest/dividend rates, but will also have access to status information provided by the NDS, which aims at significantly reducing official communication sent in hard copies (which in most cases required signatures of authorized representatives from the NDS or from the issuers).

In order to encourage issuers to use the new application, NDS has amended its fee schedule, introducing new higher fees for entities that do not provide information via the online application or do not send data correctly. Fees for issuers that send data through the webpage allowing for STP processing at NDS side will remain unchanged.

May


25 Poland

Thanks to standardisation offered by the electronic applica-tion NDS has been in a position to unify (irrespective of the type of the income payment) the deadline for submission of information concerning upcoming payments and to set it at 5 working days prior to the record date. It is seen as a step toward simplification of the process, which had been awaited by issuers.

On the other hand it should be noted that the shortened period between the announcement and RD may impact investors’ / custodians’ ability to collect required documen-tation (i.e. tax documents) prior to the record date, meaning that it is now even more important than before to make sure such documentation is in place in advance.

Impact on investors The implementation of standardised electronic communi-cation between the National Depository for Securities and local issuers should streamline the exchange of information concerning income payments in Poland, allowing for auto-mated processing at NDS and thus reducing risks related to the preparation/interpretation of official letters that used to be sent in hard copy. Investors should note amended deadlines for market notifications concerning upcoming payments resulting in a shortened period between the announcement and the record date.

Written and edited by: Krzysztof Pekrul Relationship Manager Global Securities Services, PolandTel. +48 22 5245864 · [email protected]



26

Market Capitalisation RON 87.0bn




SE Turnover (Bucharest SE) RON 579.0mn

Monthly Index Performance (BET/BSE) -0,9%





EUR/RON 4.47



RomaNIa


Romania

Market Capitalisation HRK 397.2 bnYTD Dev. of Market Capitalisation 2.307Number of SE Transactions p.m. 96000YTD Dev. of SE Transactions 7.107SE Turnover (Zagreb SE) HRK 5977.5 mnMonthly Index Performance (Crobex/ZSE) 0.017GDP per Capita (2012e in EUR) 6,624GDP Real 2012e (Change against prev. year in %) 3.43-Month Money Market Rate (current in %) 5.00Inflation in 2012e (yearly average in %) 3.7EUR/RON 4.47Upcoming Holidays none

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5/24/2012 12:46 PM

BET

Stock Exchange: new cross-border connection with Bulgarian DepositoryOn May 15, 2012 the necessary documents were signed in Sofia for the establishment of a cross-border connec-tion between the Romanian Central Depository and its cor-responding entity in Bulgaria, the Central Depository AD (CD AD).

Thus, the Romanian Central Depository will become member at the CD AD, which will allow Romanian investors to run “versus payment” operations in RON as well as operations “free of payment” with shares and corporate bonds admin-istrated by the above mentioned institution.

The Central Depository AD will ensure register services for the issuers traded at the Sofia Stock Exchange and will run set-tlement operations for transactions with financial instruments.

Impact on investors Connection between Romanian and Bulgarian Central Depositories.

Romanian Government to maintain privatisation programmeLucian Isar, the Minister Delegate for the Business Environ-ment, declared that Romania will maintain the schedule established for privatisations. Mr. Isar stated that the sale of 10% of Transgaz will be started by the end of June. Also, the IPOs for Romgaz, Hidroelectrica and Nuclearelectrica are planned for September, October and December respectively.


May


27 Romania

Communications Ministry still analyzing Romtelecom’s listingThe Communications Ministry is still analyzing the state’s options for the listing of Romtelecom, in which it holds a 46% stake, according to the minister, Razvan Mustea. The contract has an estimated value of EUR 200,000, excluding VAT, and a period of six months, with completion due no later than May 30, 2012.

Romtelecom is the largest local fixed telecom operator and has as shareholders OTE, which holds 54.01 percent, and the Ministry of Communications, with the other 45.99 percent.

Impact on investors Possible future listing of a new Romanian company to BSE.

National Bank of Romania keeps monetary policy rate unchangedUpside risks to the inflation forecast existed before the gov-ernment change, coming mainly from food and fuel prices in 2012 and administered prices in 2013. A 16% wage hike for public sector employees would add some 0.4% to consump-tion, not enough to put significant pressure on consumer prices.

Even in our more pessimistic inflation outlook (4.2% for 2012 and 4% for 2013 vs. 3.2% for 2012 and 3% for 2013 in the NBR February forecast), real interest rates remain above 1%, too high for current economic conditions.


Written and edited by: Iuliana Manastireanu Account Manager Global Securities Services, RomaniaTel. +40 21 200 1494 · [email protected]

and: Andreea Albu Relationship Manager Global Securities Services, RomaniaTel. +40 21 200 2678 · [email protected]


28

Market Capitalisation RUB 17.8trn


Number of SE Transactions p.m. (MICEX) 8,553,369


SE Turnover (MICEX) RUB 14.3trn

Monthly Index Performance (MICEX) -13.7%





EUR/RUB 39.79

Upcoming Holidays 11, 12 June


RUSSIa


Russia

Market Capitalisation HRK 397.2 bnYTD Dev. of Market Capitalisation 2.307Number of SE Transactions p.m. 96000YTD Dev. of SE Transactions 7.107SE Turnover (Zagreb SE) HRK 5977.5 mnMonthly Index Performance (Crobex/ZSE) 0.017GDP per Capita (2012e in EUR) 9,520GDP Real 2012e (Change against prev. year in %) 4.13-Month Money Market Rate (current in %) 6.79Inflation in 2012e (yearly average in %) 7.5EUR/RUB 39.79Upcoming Holidays none

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5/24/2012 12:46 PM

RTS

MICEX-RTS stock exchange to launch premium listingMICEX-RTS stock exchange plans to create a premium list-ing segment by the 4th quarter of 2012. According to the stock exchange’s statement one of the requirement will be the Directors and Officers Liability Insurance (D&O). It is also planned to set toughened requirements on corporate govern-ance and disclosure of information.

Impact on investors New stock exchange requirements should increase transparency of listed companies and stimulate the market to adopt best international practices of corporate govern-ance.

KSD and NSD signed Memorandum of UnderstandingOn May 2, 2012 the Korea Securities Depository (KSD) and the National Securities Depository (NSD) of Russia signed a Memorandum of Understanding. According to the agree-ment, KSD and NSD will cooperate in the sphere of deposi-tory operations with securities and settlement for a successful financial market development and the promotion of interna-tional investments, using opportunities of depository and set-tlement transactions and creating operational co-operation.

The parties also agreed to lay the foundations for an informa-tion exchange, the organisation of training and technical sup-port with regarding to services and business matters, aiming at the development of the stock markets in both countries.

Impact on investors The cooperation between NSD and KSD will allow further development of the Russian financial market, in particular for depository transactions.

MICEX-RTS stock exchange plans to create compensation fund for brokers MICEX-RTS stock exchange plans to create a fund for com-pensation in case of brokers bearing significant losses par-ticularly through technical outages on the stock exchange by the end of the summer 2012. According to the President of the MICEX-RTS group, Ruben Aganbegyan, the com-pensation fund will be supplied out of the stock exchange’s revenues.

Impact on investors The compensation fund should increase market partici-pants’ confidence level.

May


29 Russia

FFMS to toughen requirements for non-government pension fundsThe Federal Financial Market Service (FFMS) of Russia has prepared an information letter addressed to non-government pension funds, which introduces the requirement that starting from July 1, 2012 the value of the fund’s own assets should amount to RUB 100 million for the entire period of its activity in accordance with the Federal Law “On non-government pension funds”.

The informational letter concerns non-government pen-sion funds which participate along with the Pension Fund of Russia (PFR) in the obligatory pension insurance system.

Impact on investors Toughened requirements shall limit the risk level of the non-government segment of the pension system of Russia.

FFMS prepares draft law on CSD code of ethicsThe Ministry of Justice of the Russian Federation has reg-istered the Federal Financial Market Service draft law on “Requirements for the code of ethics of the CSD”.

According to the draft law the Code should include the fol-lowing items:

■■ identification and prevention of conflicts of interest

■■ prevention of CSD officials and employees from using information held by CSD

■■ protection of commercial or other confidential information protected by law

■■ compliance with different standards of professional ethics.

The rules and standards of professional ethics should obey the following principles:

■■ honesty

■■ justice

■■ liability

■■ conscientiousness

■■ priority of clients’ interests

The document will enter into force 10 days following its official publication.

Impact on investors Creation of basic legislative foundations for CSD activities.

FFMS prepares draft law “On approval of requirements for risk management and internal control of the CSD”The Federal Financial Market Service has prepared the draft law “On approval of requirements for risk management and internal control of the CSD”, which defines the requirements to provide risk management and internal control. The rec-ommended measures should protect CSD from credit risks, liquidity risks, market risks, settlement risks, and risks per-tinent to the combination of CSD activities with other types of professional activities.

The draft document also includes a regulation on internal control of the CSD. The internal control functions of the CSD will be assigned to the compliance controller and (or) the compliance service.

Impact on investors The requirements for risk management and internal control will allow CSD avoiding possible losses and risks due to unfavourable market situations.


30 Russia

Amendments to the Civil Code of the Russian FederationOn April 27, 2012 the Government of the Russian Federation has approved a draft amendment to the Civil Code of the Russian Federation. According to the document the following changes were made:

■■ Abolition of the three-year maximum period for a Power of Attorney;

■■ Possibility to reject a transaction and claim compensation for losses if the counterparty’s representative exceeded his authority or was not duly authorized;

■■ Abolition of the terms opened and closed joint stock com-panies. Instead, joint stock companies will be divided into public and non-public;

■■ Definition of the criteria for affiliation: the court is entitled to recognize entities as being affiliated or not;

■■ Definition of control and of the controlling/controlled enti-ties and of the joint and several liability for the obligations of the entity controlling or under control;

■■ Introduction of classical mechanisms of international trans-actions such as warranties, compensation of losses not connected to breach of contract, corporate contracts, options, contingent deposits (escrow), negative obliga-tions, break fees, etc.

The amendments to the Civil Code are expected to enter into force as from September 1, 2012, provided all legislative processes are completed.

Impact on investors Significant amendments to Civil Legislation of the Russian Federation.

Government considers draft law on tax policy 2013–2015On their May 2, 2012 meeting the Government of the Russian Federation discussed the draft law “On the main directions of the tax policy for 2013 and the plan period for 2014 and 2015”.

The draft law includes an estimation of the results of the main directions of the tax policy for 2012 and the plan period for 2013 and 2014 and priorities for the tax policy for 2013-2015, such as the creation of an efficient and stable tax system which will provide budget stability in a medium and long-term perspective.

The draft law defines tax measures for the financial market, such as:

■■ Further development of the taxation of financial instru-ments and investors’ and market participants’ activities as part of the establishment of an international finance centre;

■■ Definition of the taxation procedure for transactions with Russian depositary receipts and security futures which circulate on the Russian stock market for non-residents of the Russian Federation;

■■ Losses on financial instruments of forward contracts, which are executed by taxpayers with foreign organisa-tions under foreign legislation subject to judicial defence under the applicable foreign legislation, will be defined for taxation.

Impact on investors Further development of taxation of financial instruments and professional market participants.



31

Market Capitalisation RSD 836.8bn




SE Turnover (Belgrade SE) RSD 1.1bn

Monthly Index Performance (Belex 15) -0.1%





EUR/RSD 115.94


Source: Bloomberg

SERBIa


Serbia

Market Capitalisation HRK 397.2 bnYTD Dev. of Market Capitalisation 2.307Number of SE Transactions p.m. 96000YTD Dev. of SE Transactions 7.107SE Turnover (Zagreb SE) HRK 5977.5 mnMonthly Index Performance (Crobex/ZSE) 0.017GDP per Capita (2012e in EUR) 4,546GDP Real 2012e (Change against prev. year in %) 3.53-Month Money Market Rate (current in %) 10.80Inflation in 2012e (yearly average in %) 6.7EUR/RSD 115.94Upcoming Holidays none

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5/24/2012 12:46 PM

BELEX15

Serbia has votedOpposition Serbian Progressive Party (SNS) leader Tomislav Nikolic won the presidential runoff, taking 49.8% of the votes, ahead of ruling Democratic Party (DS) leader Boris Tadic, with 47%, according to final estimates. Turnout was estimated at 46.3%. Claiming the election victory, Nikolic said that the country would not deviate from its European course, also noting that Serbia will seek to protect its people in Kosovo. He recalled that he has stepped down as SNS leader in order to take office as Serbian president.

Conceding defeat, Tadic blamed the election result on the global economic crisis. He also noted that he expects Serbia to continue EU integration efforts. Tadic said that he will cer-tainly not be the next prime minister, noting that the DS will discuss the runoff results.

Socialist Party of Serbia (SPS) leader and outgoing first deputy prime minister and interior minister Ivica Dacic, who emerged as kingmaker following the May 6 parliamentary polls, has endorsed Tadic, but has also said that talks on the next government’s makeup will be held following the runoff.

Under the law, the new parliament must be formed by June 9, while the next government must take office by Septem-ber 5.The SNS led camp won 73 seats in the 250-member parliament, ahead of the DS-headed bloc with 67 seats. The bloc led by the SPS won 44 seats, followed by the DSS, with 21 seats, Cedomir Jovanovic’s Liberal Democratic Party (LDP)-led “Turnaround” movement, 19, and former economy minister Mladjan Dinkic’s United Regions of Serbia (URS), 16 seats. The Alliance of Vojvodina Hungarians (SVM) will have five MPs and other ethnic minorities’ parties a total of five seats in the new parliament.


May


32 Serbia

Written and edited by: Aleksandra Ilijevski Senior Relationship Manager Global Securities Services, SerbiaTel: +381 11 3028 612 · [email protected]

Serbia’s GDP shrinks in Q1 2012Serbia’s GDP in the first quarter of 2012, in last year’s prices, contracted by 1.3% year-on-year in real terms, according to the Statistics Office’s flash estimate. In 2011, the country’s GDP grew by 1.6%, with year-on-year expansions at 3% in the first quarter, 2.5% in the second quarter, 0.6% in the third quarter, and 0.6% in the fourth quarter of the year, according to the Serbian Statistics Office.

In January-March 2012, Serbia’s industrial output shrank by 5.9% year-on-year, the Statistics Office said. Industrial pro-duction in March fell by 3.2% year-on-year and 0.6% against the 2011 average. In March, electricity, gas, steam and air conditioning supply posted the biggest year-on-year drop, of 13.4%, with the processing industry recording a 0.8% decrease and mining going up by 3.2%. The production of energy declined by 10.6%, intermediary goods, not includ-ing energy, by 6.7%, and durable consumer goods by 5.7%, while the output of capital goods increased by 12.2% and non-durable consumer goods by 4.4%.

Impact on investors The country’s year-on-year GDP growth shows a negative trend in real terms.


33

Market Capitalisation EUR 34.7bn


Number of SE Transactions p.m. 1,052.0


SE Turnover (Bratislava SE) EUR 0.9bn

Monthly Index Performance (SAX/BSSE) -4.8%







SLovaK REPUBLIC


Slovakia

Market Capitalisation HRK 397.2 bnYTD Dev. of Market Capitalisation 2.307Number of SE Transactions p.m. 96000YTD Dev. of SE Transactions 7.107SE Turnover (Zagreb SE) HRK 5977.5 mnMonthly Index Performance (Crobex/ZSE) 0.017GDP per Capita (2012e in EUR) 14,073GDP Real 2012e (Change against prev. year in %) 4.53-Month Money Market Rate (current in %) -Inflation in 2012e (yearly average in %) 3.7EUR/SKK -Upcoming Holidays none

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SAX

Slovak Central Bank publishes banking sector report Uncertainty worldwide has also influenced Slovakia’s financial sector. While the first half of last year saw a positive develop-ment commenced in 2010, a negative influence appeared in the second half. Last year’s profits in the banking sector surged by 34% to EUR 674 million. The profit increased by 90% over the first half but the growth pace slowed in the second half and the trend was moderately negative.

One of the core reasons was the negative development on financial markets with reassessing securities; the growth from interest income slowed and the risk became more significant.

The debt crisis influenced also Slovakia. The country’s bank-ing sector felt its influence mainly in investments in Slovak government bonds, which also had a negative impact on profitability. The Central Bank executes stress testing of banks twice a year. At the end of last year two scenarios were tested: the first was simulating the fall of the local economy and the latter was called the crisis of states. In both the sector showed good resistance.

Impact on investors The Slovak financial sector remains stable and is resistant against negative development.

Slovak Central Bank reports loss in 2011The National Bank of Slovakia (NBS) reported a loss of EUR 76.7 million for 2011. Last year’s economic result of the Central Bank was again negatively influenced by a drop in the market price of financial instruments, namely by EUR 462 million, while in 2010 the drop was EUR 673.5 million. The bank attributes the drop in market prices to the crisis situation on European financial markets. The Banking Board of the Central Bank decided that the loss of NBS will be redirected to the account of uncovered losses from previous years and will be covered from its future profits.

The National Bank of Slovakia was founded on January 1, 1993. It has become part of the Eurosystem on January 1, 2009, when Slovakia adopted the euro as its currency.

Impact on investors This year results represent a 85.11% improvement in comparison to 2010. The main source of income last year came from bond yields.

May


34 Slovak Republic

Bratislava Stock Exchange trading in April 2012In the first month of the second quarter of 2012, the members of the Bratislava Stock Exchange (BSSE) used the electronic trading system on 19 business days. A total of 1,052 transac-tions were concluded in this period, in which 660,263,383 units of securities were traded and the achieved financial volume amounted to EUR 900.96 million.

All three indicators decreased in comparison with the previous month: the number of concluded transactions by 47.45%, the amount of traded securities by 11.67% and the achieved financial volume by 17.75%. On a year-on-year basis, on the other hand, the number of concluded transactions rose by 119.17% and the amount of traded securities increased by 152.81%. This, however, had no effect on the achieved financial volume which fell on the same basis by nearly 50%.

Similar to previous periods, negotiated deals in April 2012 dominated over electronic order book transactions (i.e. price-setting deals), with the former accounting for 96.66% of the total trading volume. A total of 244 negotiated deals (in a volume of EUR 870.83 million) were concluded, as opposed to 808 electronic order book transactions in a financial volume of EUR 30.13 million.

The month of April 2012 was no exception in the longstand-ing trend, as investors continued to focus on debt securities. Bond transactions generated over 99.36% of the achieved volume. A total of 278 bond transactions were concluded in the period under review, in which 660,045,471 units of securities were traded in a financial volume exceeding EUR 895.2 million. In comparison with March 2012, the number of concluded transactions fell by 31.02%, the amount of traded securities decreased by 11.64% and the achieved financial volume went down by 16.36%.

On a year-on-year basis the number of concluded transac-tions, as well as the amount of traded securities increased (+104.41% and +152.93%, respectively), while the achieved financial volume sank by nearly 50%. Similar to previous months, negotiated deals in bonds (in a financial volume of EUR 870.25 million) significantly dominated over electronic order book transactions (EUR 24.98 million).

Equity securities of local companies were bought and sold in 774 transactions, in which 217,912 share units were traded in a financial volume of EUR 5.73 million. All three indicators decreased against March 2012: the number of concluded transactions by 51.59%, the amount of traded securities by 53.72% and the achieved financial volume by 77.07%. Electronic order book transactions in shares (in a volume of EUR 5.14 million) in April 2012 prevailed over negotiated deals (EUR 582,982). Transactions (both negotiated and price-setting) in the share issues of Tatry mountain resorts and Best Hotel Properties generated over 87% of the total volume of share transactions.

Transactions concluded by non-residents in April 2012 accounted for 40.85% of the total volume of transactions, out of which the buy side represented 27.77% and the sell side 53.92%.

The SAX index ended the month of April 2012 at 193.85 points, representing a 4.76-percent decrease on a month-on-previous-month basis and a 21.72-percent decrease year-on-year.


Written and edited by: Rastislav Rajninec Relationship Manager Global Securities Services, Slovak RepublicTel. +421 2 4950 2424 · [email protected]


35

Market Capitalisation EUR 18,276mn




SE Turnover (Ljubljana SE) EUR 23.2mn

Monthly Index Performance (SBI TOP) -0.7%







SLovENIa


Slovenia

Market Capitalisation HRK 397.2 bnYTD Dev. of Market Capitalisation 2.307Number of SE Transactions p.m. 96000YTD Dev. of SE Transactions 7.107SE Turnover (Zagreb SE) HRK 5977.5 mnMonthly Index Performance (Crobex/ZSE) 0.017GDP per Capita (2012e in EUR) 19,532GDP Real 2012e (Change against prev. year in %) 2.83-Month Money Market Rate (current in %) 0.60Inflation in 2012e (yearly average in %) 2.9EUR/RSD -Upcoming Holidays none

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SBI TOP

Corporate Income Tax amendedThe amended Corporate Income Tax was published in the Official Gazette on April 26, 2012. It will be valid from April 30, 2012 and is applicable from January 1, 2012. The tax rate on corporate income is reduced from 20% to 15%. The tax rate will be reduced step by step – in the year 2012 it will be 18%, in the year 2013 17%, in the year 2014 14% and in the year 2015 it will be 15%.


Austerity package and revised 2012 budget approved in ParliamentThe National Assembly passed the Public Finance Balance Act, with 49 votes in favour and 31 against, thus approving the Government’s austerity package on Friday May 18, 2012 late evening. The package was also the basis for the 2012 revised budget, which also passed with 48 votes in favour and 27 against.

The finance minister Mr Šuštaršic said that the combined result of all the measures aiming at reducing the deficit is 800 million euros, with the budget deficit at the end of the year totalling 1.1 billion euros, which is 3% of GDP. The govern-ment deficit, calculated with the ESA 95 methodology, will be between 3.5 and 4% of GDP.

The Public Finance Balance Act affects over 40 other acts or other legislation, which testifies to the fact that the austerity measures will affect numerous areas, including salaries and other income of public sector workers. According to the agreement reached with social partners some days ago, the salaries of public sector workers will be reduced by eight per cent, beginning in June 2012.

In his address to the National Assembly Slovenian Prime Minister Janez Janša stressed that Slovenia like the rest of Europe was aware that the revival of economic growth requires measures for the creation of new jobs. The adop-tion of the austerity package and the revised budget was only the necessary precondition for Slovenia’s exit from the crisis towards sustainable growth and increased well-being.


May

Written and edited by: Elmedina Garibovic Relationship Manager Global Securities Services, SloveniaTel. +386 1 587 65 97 · [email protected]


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Market Capitalisation (PFTS) UAH 196.3bn

YTD Dev. of Market Capitalisation (PFTS) -4.1%

Number of SE Transactions p.m. (PFTS) 47,288

YTD Dev. of SE Transactions (PFTS) -59.5%

SE Turnover (PFTS) UAH 1.1bn

Monthly Index Performance (PFTS) -1.6%





EUR/UAH 10.14

Upcoming Holidays 4, 28 June


UKRaINE


Ukraine

Market Capitalisation HRK 397.2 bnYTD Dev. of Market Capitalisation 2.307Number of SE Transactions p.m. 96000YTD Dev. of SE Transactions 7.107SE Turnover (Zagreb SE) HRK 5977.5 mnMonthly Index Performance (Crobex/ZSE) 0.017GDP per Capita (2012e in EUR) 3,285GDP Real 2012e (Change against prev. year in %) 5.03-Month Money Market Rate (current in %) 11.50Inflation in 2012e (yearly average in %) 10.4EUR/UAH 10.14Upcoming Holidays none

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Draft law on Joint-Stock Companies’ Activities drawn up The National Securities and Stock Market Commission (NSSMC), the Ukrainian market regulator, has worked out a concept of the “Law on Joint-Stock Companies’ Activities”, which will improve activities of joint-stock companies on the securities market. The relevant decision was taken at the last meeting of the market regulator.

The draft law has been developed first and foremost with a view to raising effectiveness and improving corporate gov-ernance in joint-stock companies. The market regulator has also prepared relevant amendments to a range of laws which regulate activities on the securities market.

Raising corporate governance standards and corporate ethics is the main task of the market regulator. The above-mentioned changes will make it possible to solve problematic issues, particularly concerning shares buy-in, submission of information to the market regulator, the definition of market value for securities, the improvement of shareholders meet-ings, etc.

The concept was developed with the aim of further adapting the Law On Joint-stock companies to the norms of the EU legislation.

The document has already been submitted to the relevant ministries and institutions for approval.

Source: Press office of NSSMC

Impact on investors Further steps to adapting Ukrainian legislation to EU prin-ciples.

Written and edited by: Katherine Yevtushenko Relationship Manager Global Securities Services, UkraineTel. +38 044 590 1210 · [email protected]


37

UzBEKISTaN · GEoRGIa · azERBaIJaN

UzBEKISTAn

ISIN and CFI identification codes to be set on Uzbek issuers’ securities In the 1st quarter 2012 the State enterprise Central Securi-ties Depository of the Republic of Uzbekistan (UzCSD) and the National Settlement Depository (NSD) of Russia started a test run for the information exchange in order to set ISIN and CFI identification codes on Uzbek issuers’ securities.

Impact on investors Implementation of international standards on the financial market of Uzbekistan.

GEoRGIA

National Bank of Georgia decreases its refinancing rate to 6.25%With effect of April 25, 2012, the National Bank decreased its refinancing rate by 0.25% to 6.25%. The decision was taken following a strengthening of the economy in the 1st quarter 2012 and a low inflation level. The National Bank of Georgia will continue further considerations on its refinancing rate. The next committee meeting is scheduled for May 23, 2012.

Impact on investors Positive trends of Georgia’s economy.

AzERBAIJAn

Fitch Ratings agency revised outlook of Azerbaijan’s ratingsThe international rating agency Fitch Ratings has revised the outlook of long-term issuers default ratings in foreign and national currencies resulting at “BBB-” with stable outlook. Additionally, the agency confirmed the short-term issuer’s default rating in foreign currency on F3 and country ceilings rating on “BBB-”.

The decision was taken as the Government increased spend-ing in 2011 by more than had been expected, and which had an influence on a sharp decrease in the oil production.

Impact on investors Negative trends of Azerbaijan’s economy are lead by high budget spending.


38

Mongolian Parliament to adopt new securities market lawThe Mongolian Parliament plans to adopt a new securities market law after more than six years of discussion. The new securities market law is expected to be a major step in Mon-golia’s efforts to bring its capital markets up to world-class standards.

The new securities law will include the following items:

■■ Abolition of the requirement for companies issuing securi-ties to be registered in Mongolia in order to be listed on the Mongolian Stock Exchange (MSE), if the company’s securities are listed abroad;

■■ Definition of the procedure for issuing depositary receipts whose underlying securities are traded on a foreign ex-change. The draft document foresees two types of de-positary receipts – Mongolian Depositary Receipts and International Depositary Receipts;

■■ Including new terms for new types of arrangements such as custodial and trustee holders (the current version of the law does not recognize custodial and trustee holders. Only registered holders of securities are legally recognized). According to the document only domestic entities could be nominee holders in Mongolia;

As a result the law will

■■ define various securities market terms and prospectus requirements;

■■ specifically set out broker, dealer and underwriter respon-sibilities;

■■ strengthen disclosure and transparency requirements;

■■ foresee trading in T+3 mode;

■■ incorporate the official listing rules from the U.K.’s Financial Services Act, which will provide a legislative framework for listing and the operation of listed companies.

Impact on investors The new securities market law will bring the Mongolian securities market to international standards by providing transparency and development of the market infrastruc-ture.

moNGoLIa

Mongolian Parliament discusses law of investment by foreign state-owned companies in strategic assetsThe Mongolian Parliament plans to amend the current law to set the requirements for government approval on all acquisi-tions by foreign state-owned companies in strategic Mongo-lian companies (resource companies or mines). The current version of the law does not include any limits in acquisition of shares in strategic companies of Mongolia.

Initially the legislators decided to define 16 strategically impor-tant sectors which include sectors such as minerals, food, agriculture, power, property, transportation and communica-tion. According to the draft law companies of these sectors were supposed to be 51% state controlled.

Later the draft was diluted and the restrictions for foreign investments were partially mitigated in order not to affect the mineral-depending country’s economic growth. However, mining, media and banking projects should still be subject to strict restrictions. In accordance with the experts’ conclusions the draft law will be subject for further alterations.

Impact on investors The new law should specify and toughen requirements for foreign investment in Mongolia.



39

yoUR CoNTaCTS

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40 Your Contacts

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41 Your Contacts

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42

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as of 29 August 2011


43

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