Tarik Kurbegović, Director of SASE: Operating promotion and development projects through TIS across the region

In recent years there has been an increase in the total turnover on the stock exchanges in Bosnia and Herzegovina, and only in 2016 on the Sarajevo Stock Exchange (SASE) there were 16 successful public auction of bonds and treasury bills in the amount of 460 million BAM. In an interview for TIS Tarik Kurbegović, Director of Sarajevo Stock Exchange, said among other things in which regional projects participates SASE, with whom they have good cooperation, and what is that we can expect form Regional Forum on market, investment and statistics – TIS.

What is current status of investment projects and exchanges, and what is the state of capital market in B&H?

Tarik Kurbegović: Observing the trend in Stock Exchanges in B&H in recent years it can be concluded that there was a “strong increase” in investment activities.

Turnover of SASE in 2016 was of 755 million BAM. Primary trade was of 460 million BAM (60.25%). Negotiated trade blocks of shares were 34 million BAM (4.53%). Official stock turnover was of 260 million BAM (34.52%).

The structure of investors on Official stock turnover: Guardians 62 million BAM, non-residents (foreign individuals and legal entities) 39 million BAM and domestic investors 160 million BAM.

Turnover of BLSE (Banja Luka Stock Exchange) in 2016 was of 625 million BAM. Primary trade was of 468 million BAM (74.90%). Negotiated trade and packers shares were of 29 million BAM (4.70%). Official stock turnover was of 128 million (20.50%).

By detail analysis of traffic structure it is evident that a significant amount of traffic is on the primary market, which is tied for the purpose of financing the budget emission of treasury bills and bonds. More realistic indicators of market situation represents a regular Stock Exchange trade that in recent years recorded more or less constant, but not so auction delivery growth as is the case with the total turnover.

In which regional projects participates SASE and with whom you realize a cooperation?

Tarik Kurbegović: Joining and setting up to the platform SEE link (regional platforms) for trading with Macedonian, Zagreb, Bulgaria, Athens and Montenegro Stock Exchange which will in perspective SASE members and their clients enable access to all capital markets in Balkan. SEE link platform is characterized by opportunities for trading in multiple markets through which investors will be able to issue orders with the help of a local broker using infrastructure SEE link platform. Implementation of the Istanbul Stock Exchange platform for small and medium enterprises (SME) and Startup in our market. Platform and the entire project aims to connect SMEs and Startups with investors thus it is to improve the conditions entire B&H economy. The plan for 2017 envisages activities SASE to establish legal and other regulatory conditions to establish a multilateral compensation in cooperation with the Banja Luka Stock Exchange.

What impact on the market can have a project such as the Regional Forum on market, investment and statistics – TIS?

Tarik Kurbegović: Any kind of cooperation especially if there is a regional sign is a great channel of exchange of information, knowledge and experiences. Also, it is essential that the project TIS include specific projects that need to be analyzed in the light of best practice projects, which are implemented in different countries. Pursuant to the said project TIS can provide the necessary communication of all relevant regional actors and institutions in order to together contribute to the promotion and development of projects related to the region.

In your opinion, in today’s political and economic situation, what are the possibilities of cooperation between non-governmental, governmental and business sector?

Tarik Kurbegović: In our current political and economic situation it is absolutely necessary strong cooperation of mentioned three sectors. In this process, an equally important role is played by the public, civil and private sectors in order to together continuously develop sustainable and effective mechanisms of their mutual cooperation as a response to the current crisis through devising development strategies.

What marked the business of BH Stock Exchange in 2016? How do you comment enhanced broadcasting activities in the Federation?

Tarik Kurbegović: In 2016, there were 16 successful public auction of bonds and treasury bills on SASE in amount of 460 million BAM. The reason for increased broadcasting activities lies in the need on the one hand in Federation or borrowing in the local market, primarily to finance the budget of the Federation. On the other hand foreign banks that are too liquid use this way of short-term investments to liberate reserves with the Central bank that would pay a negative interest rate, , and thus are able to earn. It is marked that in almost all public auctions were twice more demand than supply.

What is the basis of your cooperation with the Banja Luka Stock Exchange, whether internal politics affects business between Banja Luka and Sarajevo Stock Exchange?

Tarik Kurbegović: As mentioned earlier SASE would after establishment of legal and other regulatory assumptions worked to establish cooperation with the Banja Luka Stock Exchange, which owns the software solutions necessary for the implementation of the project multilateral compensation at the state level. Since the SASE and BLSE commercial company collaboration on projects that would result in additional revenue is not questionable and limited. In terms of general social interest stock exchanges and various laws and regulations in both entities, there are obstacles and problems so that certain activities of issuers and capital market participants strictly addressed to each of the Stock Exchange.

What is essential for attracting foreign investments in B&H?

Tarik Kurbegović: In the first place is necessary political and economic stability of B&H observed through the EU accession process. Key priorities for BH authorities which will attract investments are improving the business climate and competitiveness, rule of law, political and legal stability and predictable tax policy. Troubleshoot problems in the process of setting up companies and licensing. Also it is necessary to harmonize regulations in labor relations at the state level, and to regulate this uniformly in both entities and Brčko District.

What opportunities for economic development opens induction of SASE Islamic index? Will the induction of Islamic indexes attract investors, and how will it affect the turnover on the Stock Exchange?

Tarik Kurbegović: SASE BBI Islamic Index was inducted with the aim of “putting on the radar” Sarajevo Stock Exchange and those investors that its business and investment leads in accordance with the principles of Islamic economics. Through the index and list, SASE in cooperation with BBI wanted to provide these investors additional services,  identifying shares that may be considered acceptable in the above sense, and continuous monitoring of the movement of that part of the market. By creating additional equity investment spectrum in B&H, SASE wants to contribute attraction of these investments in BH economy. On the other hand, we wanted to encourage the cooperation of these companies with mentioned markets through a possibly easier their opening for products/services of these companies. In either case, there is positive effect on the balance of payments position of B&H, and ultimately to the growth and development of BH Economy. The process of positioning B&H as an attractive market in this sense is a relatively long process, and the induction of SASE BBI Index is one of the steps towards it. We expect that in the coming period, with an efforts and other key actors of development of financial markets and the economy in general, initiated activities contribute to the achievement of set goals.

What is the situation with government bonds, whether they are buying?

Tarik Kurbegović: In recent years, the auction delivery is demand for government bonds by financial institutions, as mentioned earlier. In addition to the primary emission is a significant traffic is realized in the secondary bond market. At the quotation of bonds, turnover realized in 2016 amounted to 62.5 million BAM or 35.19% of the total official turnover of which are:

  1. bonds of war claims FB&H in the amount of 19.3 million BAM,
  2. bonds of FB&H budget expenditures were traded in the amount of 39.4 million BAM,
  3. bonds of old foreign currency savings bonds total turnover was in the amount of 3.7 million BAM.

Do you have any concrete proposals for stimulating the capital markets or measures that would contribute to the increased activities of Stock Exchanges?

Tarik Kurbegović: The potential for investing in B&H exists, it now lies in the banks in the form of savings of citizens (over 10 billion BAM). Holders of savings run and think do they want to keep savings in banks at low interest rates or make a restructuring savings. The domestic capital market may be a partial alternative investment. Projects and activities that would stimulate the capital market:

  • The induction of initial public offerings (IPO) would certainly contribute to increased activity exchanges.
  • The potential partial privatization of BH Telecom by model (Croatian Telecom) for right for buying packages of shares by the citizens would bring the citizens’ interest to invest in the domestic capital market, the change of shareholder culture and strengthening of the domestic capital market.
  • Further bond issue of war damages (liability for debts incurred during the war or during the imminent war damage) as a category of internal debt of FB&H, about 300 million BAM.
  • Education of private companies (Inc.) and joint-stock companies on the possibility of raising capital by issuing shares and corporate bonds for capital projects could be an alternative to bank loans.

Regional Project on Market Investments and Statistics