Why has the Macedonian Stock Exchange been unable to make a dent?

Why has the Macedonian Stock Exchange been unable to make a dent?

There is a lack of success at the Macedonian Stock Exchange (MSE). Certainly, the MSE has seen recent gains in several of our standard metrics for measuring an exchange's performance. Monthly money volume has risen along with the number of transactions, for example. In the end, this isn't even close to success.

Who's to blame? What do you think of the current management of the MSE?

Neither do I. To be honest, I believe that the MSE's leadership is outstanding, and they are always striving to integrate new trading strategies and add new companies to the exchange. The issues aren't with you; they're with someone else.

Financial markets centered on stock exchanges are among the most significant in the world. Giving is one of the most effective ways to raise funds.In the West, it is utilized to fund most of the demands of enterprises, well in excess of the financing that banks can provide. Individuals and businesses both set aside a portion of their earnings to be invested. The stock market serves as a meeting place for investors and savers who want to put their money to work.

Stock markets also aid governments in funding their own internal borrowing needs. Investors purchase government liabilities (also known as bonds) on the country's stock markets. When it comes to repaying national debt, the stock market is an essential instrument.

However, before a stock market can function successfully, a few requirements must be met.

The most crucial need is that the nation where the stock exchange is located has a robust, developing economy. A healthy economy attracts investors, whereas a diseased one repels them.

The Macedonian economy seems to fall into the second group. Inflation, low savings, sluggish growth, and a widening trade and payments imbalance are all symptoms of a deteriorating economic situation. This, however, is really a trick of the eye. Macedonia's economy is in much better shape than most people realize. The data on unemployment is slanted in favor of the unemployed. In reality, they are a sign of people trying to avoid paying their fair share of taxes. Even according to official figures, the economy is expanding. The illicit market is expanding at an even greater rate. Massive money injections from donor nations fill the shortfalls. Per capita, Macedonia receives more foreign aid than Russia. In order to blame the deteriorating economic situation, it is usually convenient, but the cold, objective facts do not support this.

Companies' earnings (including those listed on the MSE) rise in tandem with an expanding economy. The stock of these businesses is thus a worthwhile investment.

We have to look elsewhere for the issue since no one is purchasing it.

Microeconomic and macroeconomic stability are necessary for a healthy stock market. Macedonia has more than its fair share of issues in this area.

Businesses that used social capital to undergo transformation had four major flaws: no new management, ideas, or money were supplied to the struggling organizations that were "converted." A lot of people just don't think that they've been changed. They are the same individuals who are in charge of the same performances, but they are dressed in different costumes.

Secondly, the idea of a hierarchy, i.e., a chain of command, is violated by such a transition.

It distorts the line between capital (capitalists) and labor (owners). That's a problem since a ship must have one and only one captain. Authority and accountability must be vested in a single individual. There can be no management when it is done collectively.

Furthermore, all forms of innovation, change, and renewal are thwarted. As long as the same management is in place, what hope is there for a fresh start? If owners and workers are one and the same, how can thousands of owners vote to deteriorate the circumstances of the workforce? Because of this, management is contaminated by uneconomic factors such as power conflicts between employees and social and political issues.

We've figured out who the bad guy is. High (real) interest rates are the alternative. For three reasons, the stock market is unable to recover when interest rates are high:

As a result of increased finance costs (interest payments), companies' earnings are reduced. Second, borrowing money and investing in the stock market is not a good use of your time or money.

Another reason to avoid investing in stocks is that banks provide higher interest rates on savings than on stock market investments. Stock markets hate high interest rates.

Low interest rates are also a problem. In the absence of savings, there is no capital for stock investments.

The present scenario in Macedonia is precisely like this: very high interest rates paired with extremely little savings. Clients and banks have a fundamental distrust of one another. They want to retain their money in different ways.

The list of prerequisites for a well-functioning stock market is far from complete, though.

When making investments, investors need to know all there is to know about the companies that they're considering. They will be able to react quickly to changes in the firm and avoid losses by doing so. This will also make it more difficult for them to be cheated on, which brings us to the topic of accounting standards. Macedonia's accounting regulations have just recently been updated to align with Western accounting standards. Even today, the resemblance between the two is minuscule. Firms in Macedonia use a two-tiered accounting system. One set of books is for tax purposes. It is designed to display the company's losses or gains at the discretion of its executives. The usual Macedonian financial accounts are riddled with a complex web of unreported reserves. If they are retained at all, another set of books represents reality. A major obstacle to overseas investment, since foreign investors are the driving force in any contemporary stock market.

According to the law, investors have faith in the stock market because it protects them from the company's management, the government, and other investors who might try to rig the market or manipulate stock prices.

To put it another way, legislation is worthless without robust institutions of justice and law enforcement to back it up. Even if you succeed in enforcing your property rights, the result is never certain in Macedonia. Laws and regulations are still in the planning stages, and some of them seem to have had an abortion: they were copied verbatim from other nations' legal codices in a hurry and without sufficient thought or consideration (Germany, Britain).

In the end, the presence of a non-corrupt and honest marketplace is essential. The stock exchange, banks, regulators, police, and courts must be free of suspicion. There must be no ulterior motivations or considerations in order for the market to be completely efficient. Corruption interferes with the market's ability to allocate resources and exert influence. It may be clearly seen in the stock market transactions that take place every day. After all, the stock market serves as a window into a community's burgeoning economy.

But Macedonia has a problem that dwarfs all others, and it's almost endemic. Much of the plight of the Skopje stock market may be explained in this way. That the market is lacking the most crucial player: the government.

Investors, both domestic and international, expect government involvement in the local stock market. The stock markets of governments across the globe are used to sell shares in state-owned firms to citizens. All people share in the national wealth, which is represented by state-owned firms and traded on the stock market. As we have already stated, the stock market is also used by governments to borrow money from its citizens.

Macedonia's government takes no action. The MSE is completely ignored. The MSE failed to privatize a single business. Through this system, not a single denar was taken from a Macedonian citizen. The government's involvement in the stock market is a sign that it has faith in the company. Therefore, if the company does not participate in the stock market, it demonstrates that it does not believe in it. Why should investors trust the stock market if the government doesn't believe in it?

A thriving stock market has a number of unique structural qualities that stand out. All of the aforementioned situations lead to these side effects.

Investors need to be able to quickly and easily sell their shares for cash on the stock market. To put it another way, it must have a wide range of investment possibilities. As a result of this arrangement, investors will be able to pick from a wide range of assets and limit their risk by spreading their money across a number of different investments.

Effective trading tactics, automated trading and settlement systems, and the like may be implemented by the stock exchange's administration. Investors will be more likely to use a stock exchange if they can sell their shares more quickly and get their money more quickly while doing so. There is a correlation between the ease with which they can sell their assets and their desire to operate in a stock market.

It has been a mistake to invest in developing market stock exchanges for the last three years. Since the end of 1993, stock markets from Russia to Hungary, Lithuania to Poland have screamed madly.

Their performance was akin to that of a roller coaster, with tens of percent increases and decreases year after year. However, there are exceptions. For example, the Ljubljana Stock Exchange It's been more than a decade since the December 1993 peak, and the market capitalization has grown by 30 times as a result. However, this is due to the country's overall economic performance. The Croatian government is auctioning off shares in state-owned enterprises on the Zagreb Stock Exchange in order to privatize them. This has made a big difference.

The new stock markets are very volatile and quite risky. Risk and volatility go hand in hand. Investing in them is a long-term strategy. Their performance has been superior to that of more established stock exchanges like Wall Street since 1988.

These stock exchanges, on the other hand, are soaring in value, making them an excellent bet on a country's long-term prosperity.

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