The state will look for a domestic investor

The National Commission on Securities and Stock Market (NCSM) approved changes to the Stock Market Development Program until 2014. What was unexpected was that the regulator took into account the National Bank’s proposal to abandon incentives for attracting capital from non-residents - a domestic investor would be enough. At the same time, the National Securities and Stock Market Commission no longer promises tax benefits to market players, or to protect their investments to bondholders. Without foreign investors, the market will not develop, its participants are sure.

The National Securities Market Commission approved changes to the Stock Market Development Program for 2011-2015 (available to Kommersant), which it has now decided to implement in the period from 2012 to 2014. Many of the items removed from the program have already been implemented through amendments to the Tax Code. At the same time, the document has undergone significant changes. First of all, the National Bank proposed to exclude from the goals of the program the stimulation of participation of foreign investors in the stock market of Ukraine. “Increasing its capitalization and liquidity” must now be ensured by domestic investors.

Moreover, at the initiative of the NBU, reference to the “difficulty of access for Ukrainian investors to instruments of foreign issuers” with assets in Ukraine was excluded from the program. “At this stage of development of the stock market, such measures are premature, since it is necessary to create conditions for the accumulation of internal investment resources within the country,” the NBU argued. This means that the National Securities and Stock Market Commission will not implement the dual listing project, which they promised to implement at the end of 2011. At the request of the Ministry of Finance, the item on the development of training programs on the stock market for secondary schools and vocational schools was removed from the program.

To improve the situation with the protection of investor rights, it was promised to introduce a requirement for all joint stock companies (JSCs) to have a corporate secretary responsible for relations with investors by the end of 2012. Director for Market Regulation of the Fund Partnership Association Sergei Moskvin believes that all operating joint-stock companies will be able to fulfill this requirement, and only non-operating companies will have problems. Exchanges, depositories and clearing institutions are subject to annual audits according to international standards. “If the trading organizer is involved in clearing, that is, finance, it needs to be checked. But if transactions are only carried out on the exchange, then I don’t see the logic in this,” said Oleg Tkachenko, chairman of the board of the Ukrainian Exchange.

At the initiative of the Ministry of Finance, the document no longer mentions the exemption from taxation of the activities of administrators of pension funds, commission income of stock exchanges and depositories, following the example of taxation of banks. The National Securities and Stock Market Commission defended the replacement of the word “liberation” with “improvement”. “These operations should be exempt from taxation, because all administrators of pension funds are unprofitable, although they should be self-sustaining,” says Leonid Gorodetsky, head of the supervisory board of IFC ART-Capital. Despite the dissatisfaction of the Ministry of Finance, the program did not include a ban on securities dealers obtaining the status of primary dealers in the government bonds market. However, there will still be some relaxations: for example, unification of taxation of state and municipal bonds. “When accepting this amendment, we were guided by the fact that the NBU intends to reduce the tax rate on transactions with government bonds from 15% to 5%,” said Maxim Libanov, director of the department of analysis, strategy and development of legislation of the National Securities Market Commission.

Non-state pension funds (NPFs) will receive bonuses: their investments in bonds will be returned first in the event of the issuer’s default, they will also be able to invest in government bonds with a return tied to the inflation rate. “If inflation is calculated the way it is now, and the bond issuer still has the ability to turn on the printing press, then I don’t want to invest in such an instrument,” says Alexander Tkach, director of the NPF department at Astrum Investment Management.

Experts believe that the stock market's focus only on domestic investors is questionable. “This position is justified subject to the development of direct investment funds that provide for long-term investment in the Ukrainian stock market,” says Sergei Moskvin. President of the Ukrainian Stock Traders Association Maria Eremeeva notes that the absence of non-residents revealed the problem of low demand for Ukrainian shares. “Foreigners are needed in the market, although the reliance should be on domestic investors,” she is sure. To develop a domestic investor, tools are needed in which to invest, says Artemy Ershov, General Director of Troika Dialog Ukraine Investment Company. “And there are fewer and fewer of them. None of the businessmen, and even the state, is in a hurry to make an IPO or carry out privatization through stock exchanges in Ukraine. So what should an investor invest in?” he is surprised. “Perhaps someone thinks that government bonds and investment coins are a sufficient set of tools, but they are not able to satisfy the appetites of domestic investors and will contribute to capital outflow in the medium term.”

Nikolay Maksimchuk

Newspaper "Kommersant Ukraine" No. 23 dated 02/15/2012, p. 6

Themes:

Stock market

Stock market for its own