GSS Press - Raiffeisen Bank International · GSS Press | July 2015 11 July 2015 GSS Press Group...

GSS Press | July 2015 11

July 2015

GSS PressGroup Securities Services Monthly

In this issue

The EU has accelerated its speed in appro-ximating Bosnia and Herzegovina recently. Despite the fact that last year’s reform plans were not implemented within the planned timeframe, the good news is that political stability is increasing in the country. This may indeed set the stage for improvements regarding labor market policy and busi-ness climate.

The country, split into two political entities (the Federation of Bosnia and Herzegovi-na and the Republika Srpska), is under international administration up until today. With the economy improving, the country that shares a long border with the EU mem-ber Croatia, may become less dependent on subsidies from Brussels.

We have spoken to Mr. Karlheinz Dob-nigg, CEO of Raiffeisen BANK in Bosnia and Herzegovina, who reports about im-proving GDP levels on the back of an ups-wing in export.

Also, as we learned from Mr. Tarik Kur-begovic, General Manager of the Sara-jevo Stock Exchange (SASE), he believes that the domestic capital market and SASE have great potential and, in this regard, SASE has been working on increasing ties with the Istanbul Stock Exchange, both on corporate level and in joint projects. Kind regards,

Attila Szalay-Berzeviczy Executive DirectorHead of Group Securities Services

The dawn of a new era

This document is intended forinstitutional investors only.

At A GlAnce Bosnia and Herzegovina: At the crossroads 2 tAlkinG PointTarik Kurbegovic (General Manager of the Sarajevo Stock Exchange) 3 Karlheinz Dobnigg (CEO of Raiffeisen BANK in Bosnia and Herzegovina) 5

reSeArch rePort B&H economic recovery gathers momentum 7

MArket rounduP 8

city BreAk Sarajevo 12

hAve you Met Draženko Bobaš 13

contAct uS 14 iMPrint & diSclAiMer 15

AttilA‘S Photo BloG eventS 16

´

BOSNIA AND HERZEGOVINA:

´


Bosnia and herzegovina, one of the smal-lest european economies, may take a new direction supported by tailwind from the recent eu initiative.

Bosnia and Herzegovina (B&H), located in South East Europe, has a population of around 3.8 mn (2013) and covers an area of 51.200 km2 with very narrow sea access (20 km). The World Bank has clas-sified it as an upper middle income coun-try, with a 2013 GDP of EUR 13.45 bn in current prices and a GDP per capita of EUR 3,547.

Amidst a very favorable global environ-ment, B&H, just like other transition coun-tries in South East Europe, had experienced robust economic performance in the pre-crisis period (2001 – 2008), with an ave-rage 5.5% increase in real GDP growth. Moreover, B&H, along with its surrounding economies, displayed a more or less com-mon pre-crisis economic pattern, common-ly referred to as “transition catch-up pro-cess”. This period was mirrored in several economic characteristics, which altogether painted a picture of a so-called consump-tion-driven economy (the household con-sumption on average accounted for 85.5% of GDP).

However, in the second semester of 2008, the global economic crisis (which started earlier in 2007 in the euro-zone), hit the region, facing the sudden deterioration of the external environment from a very vulne-rable position. Accordingly, the small and open B&H economy was sorely afflicted with the global crisis through various chan-nels (exports, credit outcome, remittances, FDI etc), consequently resulting in a decline in the overall real GDP by 2.9% yoy during 2009.

Given the improving global environment later in 2010, B&H economic performance started to report first signs of recovery through the rebound of export and linked sectors, primarily the industry. What is more, in the post-crisis period (2010-2014) export turned out to be the only engine of the timid economic recovery, while priva-te consumption and investments remained subdued.

high expectationsTherefore, this year could mark a turning point for the local economy, as it appears to be changing from its consumption and export orientation towards an investment driven economic pattern, the only category which bears significant potential for further expansion. But to attract investments, the main precondition is political stability to gain ground, following the quite fragile ye-ars 2010-2014.

Nevertheless, this year started on the “right foot” in terms of political climate and for the first time in several years, political stability has added potential for economic growth. In late 2014, the European Union (EU) launched a new initiative for B&H, paving the way for substantial progress towards EU membership. It was primarily initiated by the foreign ministers of Germany and UK and later supported by the EU foreign ministers meeting in Brussels. Under the plan, the EU is demanding that B&H po-liticians make a written commitment to im-plementing key legal, social and economic reforms to redesign the country's structures towards EU-compatibility.

eu accession initiatedAfter several rounds of negotiations, the leaders of all major political parties in B&H have signed a written statement outlining their commitment to implementing the initiati-ve. As a result, in March 2015 the EU Coun-cil gave green light to the enforcement of the Stabilization and Association Agreement (SAA) with B&H. Finally, the SAA between the EU and B&H entered into force on 1 June 2015, which is the first major step towards EU integration for B&H in several years.

The SAA will not only allow B&H to benefit from EU financial and technical assistance and from tariff-free access to EU markets for selected products, but also will put the much-needed focus on B&H as a stable and defi-nitely EU-oriented country. The positive poli-tical momentum in the country, mirrored in the EU initiative and the SAA for B&H, could definitely boost economic growth in 2015 primarily through increased investments.

However, in order to attract foreign invest-ment, the ruling political parties must start implementing the required reforms related to the labor market, administrative barriers, fiscal stability etc. With this new approach, the EU has demonstrated willingness to help B&H on its reform path but now it is up to local politics to take advantage of this support. The political leaders have got to guide the country towards EU membership, making this year as one of the most impor-tant years in Bosnia and Herzegovina’s recent history.

draženko Bobaš Head of GSS Bosnia and Herzegovina

At A GlAnce

BOSNIA AND HERZEGOVINA At the crossroads


tAlkinG Point

Mr. kurbegovic, would you please descri-be the situation on the capital market of Bosnia and herzegovina?At present, the capital market in Bosnia and Herzegovina represents only a small part of the country’s overall financial sys-tem. While there is a large number of com-panies listed on the two entity-level stock exchanges – a result from the mass pri-vatization program in the 90s – in reality only a few issuers have actually used the capital market to raise capital to finance growth and business expansion. Encoura-ging is the fact that, although still far from optimal, the number of public offerings is slowly increasing. The capital market slowly gets to the point where it is actively considered as an alternative for raising capital. A major motivator in this regard are the frequent auctions of government bonds and T-Bills on the Sarajevo Stock Exchange, which show potential issuers what the capital market can do for them.

One could say that the domestic capital market, just like the rest of the economy, is held hostage by the political crises which prevent much needed economic reforms.Transparency of issuers, although getting constantly better, is still a shortcoming which repels investors. In this regard, the Sarajevo Stock Exchange, with support from the Secu-rities Commission, has taken important steps to make it easier and less costly for issuers to fulfill the disclosure requirements, namely by offering the possibility to publish financial reports and ad-hoc information through the web-site of the Exchange.

What do you consider to be the biggest obstacles for the market?Lack of transparency as well as insuffici-

ent adoption of modern corporate gover-nance principles are still major obstacles for making the domestic capital market more attractive. The government must implement and enforce more stringent disclosure rules coupled with hefty fines in case of violations. It also must take the lead in enacting modern corporate gover-nance principles in companies where it is the majority shareholder, especially in the protection of minority shareholder rights.

Another major hurdle is the slow process of introducing new, modernized laws which regulate the capital market and lis-ted companies. The current legislation is sometimes conflicting, leaving companies with a possibility to act against the interest

of their shareholders. For example, diffe-rent legal acts prescribe different disclosu-re requirements. Political instability is an additional obstacle, hindering not only the capital market in its development, but the rest entire of the economy.

SASe is actively looking across the bor-ders. can you please elaborate on your international initiatives?It is our belief that the domestic capital market and SASE have a great potential. Using this potential depends on SASE's own actions, but also on the willingness of the government. SASE is actively trying to use our country’s unique geographical and historical position between the West and the East.

A lot to doTarik Kurbegovic, General Manager of the Sarajevo Stock Exchange, sees a lot of potential for his market. He urges politics to enable a favorable environment, as he explained to GSS Press.

´

´


tAlkinG Point

In this regard it is important to note that we are increasing ties with the Istanbul Stock Exchange, both on a corporate level and in common projects. Borsa Istanbul and SASE are closely working together on a number of projects - data vending, index futures on the SASX-10 index, and most impor-tantly to remove the barriers between the two markets, which would enable investors from one of the largest capital market to invest in Bosnia.

SASE is also trying to attract order flow from investors which conduct their invest-ments on Sharia principles. In this regard, we are cooperating with a domestic bank to create an Islamic index which would consist of issuers which are safe for inves-ting for Sharia-investors.

Another potential for attracting additional order flow is the setup and organization of an OTC market for debt instruments, which would, after the successful implementation of the primary auctions of state bonds and T-Bills on SASE, further strengthen the role of the Exchange on the money market.

One potential stimulus, which requires ac-tive participation from the government, is the field of privatization. The most liquid issuers on our capital market still have a majority or at least a major state owner-ship. A well designed share-issue privatiza-tion, once a credible decision to privatize has been made, would have a great effect on the capital market by increasing the possible trading material.

can the exchanges in the region survive on their own, without consolidation?The effects of globalization are felt in eve-ry aspect of the world economy, meaning also in the financial markets. To stay in business, the regional Exchanges must undertake some form of consolidation. However, I reckon that it is not a realistic option to have one big regional Exchange in the future. Too great are the obstacles in form of cross-country regulatory and legal differences; obtaining information about regional stocks is yet another important thing to consider. Such a consolidation of the Stock Exchanges will also be delayed until the fragmentation of the associated clearing and settlement systems is resol-ved. We see that this is an issue even in-side the European Union.

Another approach regarding consolida-tion was the big Exchanges buying the smaller regional ones. However, as we understand from the CEE Stock Exchange Group’s idea to sell Ljubljana Stock Ex-changes (after paying a hefty price for it just some years ago), this approach is not economically sound either.

It is our belief that instead of trying to create one big regional Exchange, we should conduct activities to bring down the barriers which prevent investors from accessing other (local) markets. In this re-gard, SASE has almost finished its order

routing project with Borsa Istanbul. Now we are working to create closer links bet-ween our clearing & settlement systems. Local exchanges will always have an im-portance for local issuers, at least up to a certain size. They can serve as "breeding grounds" for the issuers until they mature to change for a bigger market.

Where do you see the local capital market in the next 5-7 years?The future of the domestic capital market depends on the direction that Bosnia Her-zegovina will take in the following years. We hope that we will get closer to the European Union, that in this process the domestic legislation will be modernized and thus stop being a hindrance to the de-velopment of the capital market.

With the adoption of European Union principles, our companies will become stronger and also more interesting for foreign and domestic investors. We ex-pect to see that the capital market will get more important for company financing in the future.

With the adoption of European Union

principles, our com-panies will become

stronger and also more interesting for

foreign and domestic investors


tAlkinG Point

Mr. dobnigg, can you tell us how much the Bank will focus on capital market opera-tions in the coming period?Raiffeisen BANK is not only a participant in the BH market, but has always been recog-nized as a respectable financial institution with a professional team in the Investment Banking Unit, providing a wide range of high level services.

In 2014, the Bank ranked first in total bond turnover and was awarded with a golden plaque from the Sarajevo Stock Exchange, along with achieving the second place in total market turnover and the third in equi-ty trading. Moreover, Raiffeisen is one of the leading custodian banks in Bosnia and Herzegovina, which is underlined by seven consecutive years of presence in the "Glo-bal Custodian" rankings. Furthermore, the Bank has been rated by "Global Investor" for the first time. The capital market will remain a significant revenue source for us in the forthcoming period. Despite challenging market circum-stances, Raiffeisen Bank in B&H has mana-ged to keep its strong position in overall turnover. Inevitable budget deficits and the current fiscal policy determine the capital market conditions. Unfortunately, the mar-ket focus will remain on primary bonds is-sues, but the Bank will continue to keep its service base on high level in accordance with market developments.

how much does the dominance of state ca-pital in the market affect its liquidity? Market liquidity is confined due to low free float and a high percentage of state controlled companies. Large foreign inves-tors could take this limitation in potential

influence on a company’s operations as an obstacle. Furthermore, a large number of state owned companies still operates ne-gatively, their capital value is weakening from year to year and their survival in the market is uncertain, so further privatization is a path they are likely to take.

However, some of these companies first need to clear ownership issues and finalize ongoing lawsuits in order to be seriously considered for sale. But in any case, the ca-pital market flows would be boosted by a gradual reduction of state ownership at se-veral large companies. This process could also positively affect economic growth and foreign investment.

What do you see as the biggest potential for capital market growth in Bosnia and herzegovina?There are several very important opportu-nities for market development which would benefit both investors and market partici-pants. Expectations in the privatization pro-cess are huge and the importance for the capital market is evident.

Looking back, shares of companies and investment funds were the only market in-struments up until 2008/2009, when both entity governments decided to issue bonds to finance the main internal debt based on war claims, frozen currency savings and general liabilities. Since 2011, the enti-ty governments have issued treasury bills and bonds in order to finance the budget deficit, which became the driving force for market turnover. And now, the potential for capital market enhancement lies particular-ly in building of a secondary market for these instruments.

On the other hand, debt as a source of financing big infrastructural projects has often been considered, but no significant project has yet been financed this way. Loans from banks or international financial institutions are still determining financing in this area. Moreover, issuance of corporate debt instruments has not yet been recog-nized and considered seriously. Neither have the benefits of IPOs been eagerly pursued.

how do you anticipate the local banking system to develop?From double digit growth rates before the crisis of 2008, the expansion of loans and assets decelerated to low single digit figu-res, mostly in line with the nominal GDP growth rates. Nevertheless, despite strong pressure for balance sheet growth and as-set quality in period 2009-2014, the B&H banking sector has managed to stay stable. Moreover, the high level of capitalization,

Preparing for an investment-oriented economy Karlheinz Dobnigg, CEO of Raiffeisen BANK in Bosnia and Herzegovina, expects a new upswing, given the political situation remains stable, he told GSS Press.


tAlkinG Point

liquidity and profitability was preserved despite the challenging economic environ-ment over the mentioned period.

As for the forthcoming years, we expect that the banking sector of B&H will con-tinue to move in line with the “real” eco-nomy. It must be noted that before 2008 banking sector indicators were growing at extremely high rates, not supported by an adequate economic expansion. These dy-namics were clearly unsustainable compa-red to GDP per capita levels and the level of the economic development. Therefore, from an economic perspective, B&H cre-dit growth has already been pretty much consumed in the past years compared to the level of economic development, and the previous double-digit growth dynamics cannot be expected to return in the medium term. Even from a financing perspective, loan and asset growth are limited to the growth of deposits.

Where is the economy heading as a whole?After moderate economic recovery in the period 2010-2014, mostly driven by the positive developments in export per-formance, the economy of B&H is on a breakpoint. In the next few years we may indeed see different economic patterns in terms of key drivers of economic perfor-mance. Before 2008, the B&H economy was mostly consumption-driven, while in the period 2009-2014 positive GDP growth rates were mostly the result of ex-port expansion. Nevertheless, consump-tion and export growth mostly reached their peaks, leaving very little room for further expansion. In order to return to much stronger GDP growth rates, the B&H economy should move to an investment-driven economic pattern, as this is the only category with significant potential for further expansion. Therefore, our positive economic assessment for the medium term is mostly based on expected investments in energy and infrastructure projects. Explicitly, in 2015 alone we foresee in-vestments in infrastructure projects worth around EUR 370 mn, and equal or even

higher amounts may be expected in the years to come.

Will foreign direct investments gain mo-mentum?We expect an investment cycle in the ener-gy sector, amounting to EUR 2.5 bn, to start this year. The largest investments re-fer to TE Tuzla (block 7) – investment value EUR 850 mn; HE Vranduk – EUR 64 mn; WM Podvelezje – EUR 60 mn and TE Ugl-jevik – EUR 715 mn. As a reminder, the construction of TE Stanari (investment value EUR 560 mn), which is the largest green field investment in B&H since its indepen-dence, started in 2014.

Therefore, even though we expect all GDP categories to positively contribute to econo-

mic expansion over the medium term, the strongest boost should come from invest-ments which should finally halt the negati-ve trend in labour market (bring down the unemployment rate and increase the sala-ries), improving the life standard of B&H citizens. However, for such a scenario to materialize, political stability is the main precondition.

Hence, with a new approach of the EU to-wards B&H, we may finally see a period of stable political situation in the country and therefore our scenario of an investment-ori-ented economy in mid-term period seems to be very well supported. Consequently, we expect that real economy of B&H will grew by an average rate of 3.5% yoy in the next five years.


reSeArch rePort

B&H economic recovery gathers momentumprovided by Raiffeisen BANK d.d. Bosna i Hercegovina

30 Please note the risk noti cations and explanations at the end of this document

-6-4-202468

-2-1012345

2010

2011

2012

2013

2014

2015

e

2016

f

Real GDP (% yoy)Industrial output (% yoy, r.h.s.)

30

35

40

45

50-4

-3

-2

-1

0

2010

2011

2012

2013

2014

2015

e

2016

f

General budget balance (% of GDP)Public debt (% of GDP, r.h.s.)

Real GDP (% yoy)

Source: Thomson Reuters, RBI/Raiffeisen RESEARCH

Budget balance and public debt


Forecast

Forecast

Key economic gures and forecasts

2010 2011 2012 2013 2014 2015e 2016f

Nominal GDP (EUR bn) 12.7 13.2 13.2 13.4 13.6 14.2 14.9

Real GDP (% yoy) 0.8 1.0 -1.2 2.5 0.5 2.5 3.0

Industrial output (% yoy) 1.6 5.6 -5.2 6.7 0.1 5.0 6.0

Unemployment rate (avg, %) 27.2 27.6 28.0 27.5 27.5 26.5 24.0

Nominal industrial wages (% yoy) 2.4 6.8 2.2 -0.5 0.3 3.0 5.0

Producer prices (avg, % yoy) 0.9 3.7 1.9 -1.8 0.0 1.0 2.0

Consumer prices (avg, % yoy) 2.1 3.7 2.1 -0.1 -0.9 1.0 2.0

Consumer prices (eop, % yoy) 3.1 3.1 1.8 -1.2 0.0 1.5 2.1

General budget balance (% of GDP) -2.5 -1.3 -2.0 -2.2 -3.8 -2.5 -2.0

Public debt (% of GDP) 38.3 38.9 39.7 41.5 45.0 44.6 42.5

Current account balance (% of GDP) -6.1 -9.7 -9.3 -6.0 -7.8 -8.0 -7.7

Official FX reserves (EUR bn) 3.3 3.3 3.3 3.6 4.0 4.1 4.3

Gross foreign debt (% of GDP) 57.3 66.8 63.1 62.5 66.4 63.6 58.3

EUR/BAM (avg) 1.96 1.96 1.96 1.96 1.96 1.96 1.96

USD/BAM (avg) 1.48 1.41 1.52 1.47 1.47 1.76 1.79


After a weak start to the year, the B&H economy started to recover in line with our expectations. The available high-profile figures for April 2015 (exports, in-dustry, retail sales) which give a first indication of economic momentum in Q2 2015 clearly reflect the expansion in the B&H economy. The mild performance at the beginning of the year may be explained by the base affect, as Q1 2014 was the strongest quarter since the State Agency for Statistics started producing quar-terly GDP statistics (2009). Therefore, our anticipation of a strong countermove in the course of the year started to materialise, and our overall GDP target rate of 2.5% yoy seems to be very well supported. Even though we expect that all GDP categories will contribute positively to economic expansion this year, the strong-est boost is expected from exports of goods and services (7.5% yoy) and gross fixed capital formation (6.0% yoy). Expansion in gross fixed capital formation is expected to be driven by the continuation of infrastructure projects and start of the electro-cycle investments. Exports of goods and services will mostly benefit from the improved external environment, particularly in the European Union. We also expect moderate growth in private and public consumption this year. The de-cline in the unemployment rate to 26.5% and growth in salaries (3.0% yoy) might lead to a notable expansion of household consumption by 2.0% yoy. In 2015, we expect a cut in the general budget deficit to 2.5% of GDP with the main as-sumption that B&H will again enter the Stand-by arrangement with the IMF.It should be noted that political developments in the country could bring addi-tional potential for economic growth if we see a continuation of the positive mo-mentum from the beginning of the year (EU reforms and SAA agreement). On the other hand, if we see another long-term political crisis (not our baseline scenario) which could slow down the announced investments and jeopardise the SBA with the IMF, we would have to cut our target for GDP growth by 50bp.

Financial analyst: Srebrenko Fatusic, Raiffeisen BANK d.d., Sarajevo

B&H economic recovery gathers momentum

Bosnia and Herzegovina

Nice start to Q2 2015 with key economic drivers on the rise We still expect GDP growth of 2.5% yoy in 2015, driven by export and investments Political developments bring higher potential… … but also risk for our baseline scenario

20 Please note the risk noti cations and explanations at the end of this document

-3

0

3

6

9

12

-1

0

1

2

3

4

2010

2011

2012

2013

2014

2015

e

2016

f

Real GDP (% yoy)Industrial output (% yoy, r.h.s.)

Czech Republic

36

38

40

42

44

46-5

-4

-3

-2

-1

0

2010

2011

2012

2013

2014

2015

e

2016

f

General budget balance (% of GDP)Public debt (% of GDP, r.h.s.)

Real GDP (% yoy)


Recovery becoming more robust

Budget balance and public debt


Forecast

Forecast

Key economic gures and forecasts

2010 2011 2012 2013 2014 2015e 2016f

Nominal GDP (EUR bn) 156.4 163.7 161.2 157.5 155.1 159.8 169.2

Real GDP (% yoy) 2.1 2.0 -0.7 -0.7 2.0 2.4 3.0

Industrial output (% yoy) 8.6 5.9 -0.8 -0.1 4.9 4.6 4.9

Unemployment rate (avg, %) 7.0 6.7 6.8 7.7 7.7 7.0 6.8

Nominal industrial wages (% yoy) 3.8 3.5 3.2 1.0 2.9 3.6 4.8

Producer prices (avg, % yoy) 1.2 5.6 2.1 0.8 -0.8 -2.6 1.9

Consumer prices (avg, % yoy) 1.5 1.9 3.3 1.4 0.4 0.2 1.7

Consumer prices (eop, % yoy) 2.3 2.4 2.4 1.4 0.1 1.0 1.6

General budget balance (% of GDP) -4.4 -2.9 -4.0 -1.3 -1.5 -2.5 -1.8

Public debt (% of GDP) 38.2 41.0 45.5 45.7 43.8 43.2 43.1

Current account balance (% of GDP) -3.6 -2.1 -1.6 -0.5 0.6 0.6 0.6

Official FX reserves (EUR bn) 31.8 31.1 34.0 40.8 44.9 46.2 48.0

Gross foreign debt (% of GDP) 55.2 54.8 60.1 63.3 66.5 65.9 65.0

EUR/CZK (avg) 25.3 24.6 25.1 26.0 27.5 27.6 27.3

USD/CZK (avg) 19.1 17.7 19.6 19.6 20.8 26.6 26.5


GDP growth gradually accelerates Growth supported by weak CZK, oil and scal policy EUR/CZK to stay above 27.0 at least until Q3 2016 Key rate unchanged at 0.05% until Q4 2016, anchoring LCY yield spread to Bunds

Economic outlookIn 2014, Czech GDP increased by 2.0% compared to a decline of -0.7% a year be-fore. Gross value added even increased by 2.6%. For 2015, we forecast economic growth to accelerate to 2.4%. The economy will mainly be supported by the weak CZK, an expansive fiscal policy and the prevailing low oil prices. Moreover, the his-torically highest current account surplus and the expected acceleration in exports suggest that external demand will keep contributing to the improving performance of the Czech economy. The expected rise in real wages by 2.6% yoy and recently record high employment suggest that the labour market is also steadily improving. Additionally, after 3 years of contraction, the first increase in construction output (+2.4% yoy in 2014) signals an upcoming rebound in this sector. Industrial produc-tion, a key driver, is expected to continue growing this year, rising by around 4.0%. The Czech economy is thus predicted to continue with fairly symmetric strengthen-ing across all key sectors.Although economic growth is solid and the labour market has improved signifi-cantly, inflation remains extremely low. At the beginning of 2015, there was a high chance that inflation would fall to negative territory. So far it seems that the Czech economy escaped deflation by one notch, with inflation now at 0.1% yoy. Without the recent fall in oil prices, inflation would be at 0.7%. Furthermore, adjusted for vol-atile food prices inflation would be close to 1%. Nevertheless, given the low infla-tionary environment in the euro area and a significant risk that prices of natural gas for households will be lowered, we expect only slow upward movement in the CPI inflation rate. By the end of the year headline in ation may reach 1% and through-out the year it would not even be a big surprise to see a slightly negative result. If we are right and the Czech National Bank allows CZK appreciation in H2 2016, inflation will probably reach the 2% inflation target in 2017.

BOSNIA AND HERZEGOVINA

Raiffeisen BANK d.d. Bosna i Hercegovina

Financial analyst: Srebrenko Fatusic, Raiffeisen BANK d.d. Bosna i Hercegovina

Raiffeisen BANK d.d.Bosna i Hercegovina


MArket rounduP

Spotlight news

HR: Exit from recessionThe National Bureau of Statistics announced that the GDP in Croatia increased by 0.5% in the first quarter 2015, compared to the same period last year, showing that the economy, after six years, exited from the reces-sion. This is the second consecutive increase in GDP, considering that the last quarter in 2014 brought the growth on an annual basis of 0.3%.

Moreover, in accordance with the recommendations of the Council of the European Union, the Croatian government adopted a National Re-form Programme for the year 2015 in order to solve structural imbalances.

In combination with funds from Euro-pean structural and investment funds, which represent the main source of financing of development projects from the budget in the period of fis-cal consolidation, reform program will increase the level of regulatory and legal security.

Warsaw capital Market Summit 2015

The fifth edition of the Warsaw Capital Market Summit took place on 18 June at the Warsaw Stock Exchange (WSE). The conference, organized by the Exchange, the State Treasury and the Polish CSD, Krajowy Depozyt Papierów Wartosciowych, is an international event focused on the capital markets in the re-gion of Central and Eastern Europe. It gathered fund managers, issuers and representatives of financial institutions and public administration not only from the CEE region but also from other European markets.

The conference concentrated on key affairs and challenges the industry is and will be facing over the next few years. One of the panel discussions focused on privatization in the CEE regi-on and on whether or not it fueled capital markets growth in this part of Europe. The panellists discussed different stages of privatization across the CEE markets, naming Romania as one of the leaders in privatization processes recently. Poland was mentioned as the country that has experienced the highest numbers of Initial Public Offerings in Europe over the recent years. The speakers generally agreed that the privatization wave in our market is close to an end as most of the state owned companies that could have been privatized have already gone through such process, though it was also noted that there is still a number of large companies which the State Treasury still partially owns and may decrease its stake in the future.

However, it was highlighted that although privatization has been the main driving force for market growth over the last decades in Poland, its termination does not mean the end of the market development. On the contrary. Now that Poland has a strong main index, WIG20, the next project, already in progress, is to increase the popularity of raising capital through stock exchange listing among the smaller players, i.e. to grow the small and medium enterprises sector on the exchange and ensure its attractiveness to investors.

But it’s not only about encouraging smaller businesses to list on the exchange, there is still work to be done to increase investors’ trust in this segment. Currently, listings outside of the main market are not too popular among domestic investors and are rarely looked at by their foreign counterparts. This is mostly due to the insufficient information publicly available to the investors as well as the lack of an objective rating that would give them a good basis for investment decisions. It is expected that a solution addressing this problem will soon be launched and will help improve market liquidity in this segment.

hFt on the horizonThere is also another development which is expected to boost volumes on the exchange and that is the entrance of a new type of players in the market, i.e. those specializing in high frequency trading (HFT). WSE representatives mentioned that they expect to see the first HFT players becoming active already in the third quarter of 2015 as all main issues, i.e. amend-ments to the WSE trading system allowing for processing large quantity of orders, netting and the “kill switch” mechanism had been successfully implemented over the last year. This type of traders are becoming increasingly popular around the world and the fact that they normally go where they see a lot of potential proves that Poland is perceived as an attractive market by investors.

PolAndRadek Ignatowicz, Head of GSS Poland

´


real estate boomAnother topic discussed at length was the Polish real estate market which has been boo-ming over the last couple of years, to meet the increasing demand for office space as many international companies have been keen to establish their presence in Poland. So far, the majority of real estate funds have been owned by foreign investors. The situation could change if only some amendments in the Polish legal framework were implemented to allow for an introduction of a new product in the market – Real Estate Investment Trusts (REITs), i.e. unit investment trusts investing, directly or indirectly, in real estate.

What is needed in this respect is an introduction of a more favourable tax treatment of such vehicles, i.e. removing the need of taxation at both corporation and investor levels in return for regular dividend payments to the unit holders. As REITs may be listed on a stock exchange, such changes would bring about a beginning of a new segment in the exchange which, judging by the experience in other markets and the ever developing real estate market in Poland, would have a big potential for a significant growth and would bring a lot of benefits to the Polish economy.

Our viewSumming it up, an exciting future lies ahead of the Polish market with a lot of potential for growth and investment opportunities for both domestic and foreign investors.

roMAniAAndrei Mezdrea, Head of GSS Romania

depozitarul central enters the t2S league

The Romanian Central Securities Depository, Depozitarul Cen-tral S.A., has successfully migrated to the pan-European sett-lement platform TARGET2-Securities on 22 June, together with the other 3 securities depositories and their users: the Bank of Greece’s depository for government bonds (BOGS); the deposi-tory of the Malta Stock Exchange; and SIX-SIS of Switzerland.

Considering the intense coverage of the settlement develop-ments, the announcement itself is no longer news.

What is good news is that, once reaching the “point of no return”, as the migration ex-perts called one of the milestones passed during the migration weekend, the Romanian CSD made a decisive step on the path leading to a further upgrade of the market infra-structure. The Romanian CSD, as member of T2S, is now directly exposed to the fierce trans-European competition, which would be a favorable incentive for the market to as-sume a cadenced pace upgrading the local systems and procedures in order to outcome the structural delay.

The fact that the Romanian CSD started the T2S activity using a guided user interface (GUI) – considered sufficient for the current pool of securities available for settlement in EUR via the euro-system – is a relevant indicator of the efforts that the CSD will further need to undertake to keep up with European competition.


romanian t2S services highlights:

• Services are limited to settlement in eur (OTC transactions of domestic fixed income instruments and foreign issues listed on BSE). The settlements in RON will continue at local level;

• instruction deadlines in t2S (local time): Delivery Versus Payment (DvP) – Settlement Date 16:00; Free of Payment (FoP) – Settlement Date 18:00;

• late settlement for matched and unmatched instructions: Unmatched settlement inst-ructions will remain active in the T2S platform for maximum 20 working days from the intended settlement date or from the date of the last amendment; matched settlement instruction will remain active in the T2S system until the settlement is executed or the instruction is bilaterally deleted;

• tolerance level: EUR 2 for settlement with a value smaller or equal to EUR 100,000; EUR 25 for settlement with a value greater than EUR 100,000.

• Matching: The matching process will be based on the settlement amount of the seller.

• reports: For the time being, partial settlement and allegement reports will not be per-mitted.

• corporate actions: The CSD will announce the technical specifications for each event at a future date.

• Fees: The CSD announced that it will not charge fees for operations carried out by its participants in T2S during the first 3 months following the go-live moment.

Our viewImportant additional resources (both financial and staff related) need to be invested for the implementation of an automated interface, which shall become fully operational in the first part of 2017. The upgrade needs to be quickly set-up: if we exclude the current year, the T2S project is just one year ahead the full implementation stage, making this exercice a real challenge.

Furthermore, the initiatives for creating a single capital market in Europe add further demand on Romanian authorities and market participants in the context of the euro adoption planned for 2019.

By joining T2S, Romania has demonstrated that it will spare no effort to play in the Euro-pean league. While we keep our optimism, we are all aware of challenges lying ahead.


ukrAineBogdana Yefremova, Head of GSS Ukraine

russian-controlled businesses risk losing licence

A new version of the Law “On licensing of business activities” entered into force in June. The Law introduces updated licence re-quirements for various business entities. According to the amend-ments, in case the licencee is controlled by entities registered in the country of an aggressor, the licence can be withdrawn. While not affecting larger industries – Radio and TV, alcohol and tobac-co production and banking – the new requirements will directly impact stock market participants: stock exchanges, custodians, asset-management companies, and brokers.

From 28 June, the stock market regulator – National Securities and Stock Market Com-mission (NSSMC) – have begun to inspect the market participants with the purpose of de-termining whether they are under control of an owner from an aggressor country. At this stage, it is not clear what and when the decision of NSSMC in case of determination of respective facts will be taken, however, the regulator will be obliged to act in accordance with the Law.

As a matter of fact, the Ukrainian stock market counts a number of entities influenced by Russian capital. For example, the stock exchanges PFTS and UX both have MICEX among their shareholders. In the first case, the stake equals 50%+1 share. In the latter, the direct and indirect stakes reach 43%, however, other minority shareholders from the Russian Fe-deration add up to more than 50% in the capital. Large Russian banks present in Ukraine are also at risk of losing their custody and brokerage licenses.

Some of the entities under scrutiny consider the possibility of re-structuring their share-holding structure through the sale of controlling stakes to investors from politically neutral countries. This is easier for smaller participants, such as brokers, and some of them alrea-dy followed this path. However, PFTS stock exchange is also undertaking specific steps in this direction.

Thus, following a Supervisory Board meeting held on 18 June, PFTS announced a decision to call an extraordinary shareholders meeting on 30 July. The main agenda item for the meeting is the re-purchase of PFTS shares by the issuer.

Our viewPutting aside the political factors standing behind, the law will doubtlessly reshape the local securities industry. The anticipated changes are expected to happen rather soon.


As the capital of Bosnia and Herzegovina, Sarajevo reflects the spirit, life and habits of the country. It was not before 1461 that a city, named Bosna-Saraj, was established around a Slavic citadel, the settlement that existed in the Sarajevo valley from 1263 until it was conquered by the Ottoman Em-pire in 1429. The name Sarajevo derives from Turkish saray ovası, meaning "the field around saray (palace)". The Ottomans ruled Bosnia for five centuries and Sarajevo grew to develop as an important cultural and trade centre of the region. Sarajevo became known by its big markets and nu-merous mosques of which the most known ones are Gazi Husrev-bey's Mosque and the Tsar's Mosque. At the time, Sarajevo was the biggest and most important Otto-man city in the Balkans. After the Ottoman rule, the Austro-Hungarian Empire acquired Bosnia (1878-1918) and many buildings in Sarajevo were built in a recognizable "Aus-trian manner". Sarajevo was industrialized by Austria-Hungary, who used the city as a testing area for new inventions, such as electric tramways (1885), before installing them in Vienna. The history of modern Sa-rajevo begins in 1992 with the declaration of independence of Bosnia and Herzegovi-na from Yugoslavia, when the city became the capital of the new state. The Yugoslav army forces established themselves on the surrounding mountains, which was the be-ginning of the longest siege in the history of modern warfare. Following the Dayton Accords and a period of stabilization, the Bosnian government declared the siege of-ficially over on February 29, 1996.

Today Sarajevo is one of the fastest develo-ping cities in the region. Presently, around 350.000 people reside in Sarajevo.

Sightseeing through many centuries Bašcaršija ("main marketplace") has star-ted to develop in mid of the 15th century. It is composed of religious buildings and numerous small stores selling and making jewellery, ornaments, shops selling traditi-onal and modern clothing and hand-made footwear. In the heart of Bašcaršija, you will find Sebilj, a pseudo-Ottoman style wooden fountain and one of Sarajevos plenty pu-blic drinking fountains. It is estimated that around 110 drinking fountains existed in XVII century. Vijecnica, the City Hall and National Library, was totally ruined during the war back in 1992, but its renovation, fully completed this year, has made it more glorious than ever before. Originally, it was erected in 1894 and represents the most beautiful and most representative building from Austro-Hungarian period, built in pseudo-Moorish style. Gazi Husref-bey's co-vered market building, a massive basilica-like stone structure that extends in length of 109 meters, was built by Gazi Husref-bey in 1543 and is worth a visit. The main pedest-rian area and shopping street in Sarajevo is Ferhadija. The retail outlets of many western brands are concentrated there, but it is the built heritage from the Austria-Hungarian period that makes this street so special.

olympic city in 1984Sarajevo is surrounded by beautiful moun-tains, half an hour of drive from the down-

town. In 1984, the city of Sarajevo hosted the XIV Olympic Games and its inhabitants took great pride in their city. Every winter, numerous tourists visit the Olympic Moun-tains to enjoy winter sports. In Sarajevo, you simply must relax. Visitors love smoking nargile in ancient coffee shops or drinking clean running water that is rare to find any-where else. Bašcaršija is the place where tourists can taste the best cevapi – char-grilled Bosnian ground meat fingers gar-nished with clotted cream and raw onion. One of the most visited restaurants there is The Morica Inn built in the first half of the 16th century.

draženko Bobaš Head of GSS Bosnia and Herzegovina

city BreAk

Sarajevo – where East meets WestSome of my top picks for ‘pit stops’ to charge one’s batteries are:

the 4 rooms of Mrs. Safija – Fusion restaurant Cekalusa 61

cajdžinica džirlo – tea house Street Kovaci Cilcma 6

inat kuca – traditional cuisine Veliki Alifakovac 1

cevabdžinica Petica – Ferhatovic – Bosnian grill restaurant Oprkanj br. 2

Sarajbosna oriental delicacy ShopGajev trg bb

ˇ

ˇ

´

´

´

´

ˇ

´


Where did you start your professional career?When you live in a country like Bosnia and Herzegovina, then you just do not have a lot of options available. To find any job af-ter graduation represents a real challenge, and most of the people can only dream about their desired workplace. But so-mehow I always have been "lucky", a per-son who leaves nothing to chance but firm-ly believing in myself and my skills and trusting that fate is in my hands. Naive, a bit crazy and brave, I knocked on the door of a CEO of a local commercial bank and so it all began.

In 2006, after six years in treasury as a mo-ney market dealer, I joined the Raiffeisen BANK team, where I was given the opportu-nity to develop the custody business as Head of Custody. 9 years later, I am still here be-cause the development is still ongoing.

What do you like about your job? And what do you find difficult?The answer to both questions is the same: it is the inherent complexity. I do not like simple tasks which do not require my full engagement and where I am only an ope-rator that handles a large number of tasks per habitual patterns. I love challenges and non-daily jobs that include my 100% commitment. As we are a small market that is still developing, my colleague Boris Miškic is the only employee in the Front of-fice besides me.

We are an all-in-one team that timely and properly fulfils all tasks. I am the Head of the GSS BiH, but at the same time I am a relationship manager, account manager, network manager, specialist for corporate actions, taxes, the operator who works

hAve you Met

with issuers, regulators and the person working on the development of GSS servi-ces within Raiffeisen BANK in B&H through lobbying with the regulatory bodies.

how do you spend your spare time?My family is my life. No matter how hard my workday was, when I come home and see the smiles of my son, daughter or wife, all the tiredness disappears in a moment. Together with my family I am rediscovering the beauty and magic of flora and fauna, the planet on which we live and very often there are discussions that go in our past history and include the dinosaurs, to plane-tary systems and galaxies. In our rapid life rhythm, we forget how beautiful life is and how we should look forward to and enjoy the little things.

It's really wonderful to be a parent, experi-encing life in small steps with my children once again, and waiting for an ordinary sunny day to play with them or to have an ice-cream makes me the happiest man in the world.

What are the biggest potentials you see for your market?In the years ahead we expect our country to finally take the road to join the EU family and, accordingly, the local capital markets to go towards the EU standards. Harmoni-zing our legislation with EU standards will make us visible and eventually lead to in-creased investments in B&H through the capital market.

Furthermore, most of the blue chip compa-nies in the Federation of B&H are still majo-rity state-owned, so the continued privati-zation would give an additional boost to development of the capital markets.

Knocking on the right door

B&H also expects a pension system reform given the current system is unsustainable. The development of new pension funds will increase the liquidity on the stock exchan-ges and make existing instruments more appealing to foreign investors.

What is your favourite place in your city?It is very difficult to pick just one favorite place in Sarajevo, but if I have to choose it will be Wilson's promenade. This street was constructed by the Austro-Hungarian Empire at the beginning of the 20th centu-ry and even the lanes of trees planted by Austrians are still here. However, the pre-sent name was named after the 28th Ame-rican President Thomas Woodrow Wilson, who declaring war on Germany, saved Bosnia and Herzegovina from Austro-Hun-garian annexation. Today, Wilson's pro-menade is a place for all: lovers, friends, children, pets, sudden encounters and even exercise.

Draženko Bobaš, Head of GSS Bosnia and Herzegovina, provides an insight into his profession

´


contAct uS

GSS central teamraiffeisen Bank international AGAm Stadtpark 91030 Vienna, Austriawww.rbinternational.comAttila Szalay-BerzeviczyHead of [email protected]: +43 1 71707-8252Jürgen SattlerHead of GSS Regional [email protected]: +43 1 71707-1882Bettina JanoschekHead of GSS Sales & Relationship [email protected]: +43 1 71707-1820

Austriaraiffeisen Bank international AGAm Stadtpark 91030 Vienna, AustriaAnita FröchHead of GSS [email protected]: +43 1 71707-3040www.rbinternational.com

Albaniaraiffeisen Bank Sh.a.“European Trade Center”Bulevardi “Bajram Curri” TiranaMirela BoriciHead of GSS [email protected]: +355 4 2381000-1074www.raiffeisen.al

BelarusPriorbank JSc31-A, V. Khoruzhey Str.220002 Minskyury dorofeyHead of GSS [email protected]: +375 17 2899102www.priorbank.by

Bosnia and herzegovinaraiffeisen BAnk d.d.Bosna i hercegovinaZmaja od Bosne bb71000 Sarajevodraženko BobašHead of GSS [email protected]: +387 33 287-153www.raiffeisenbank.ba

Bulgariaraiffeisenbank (Bulgaria) eAd55, Nicola Vaptzarov Blvd., Business Center Expo 2000, 1407 SofiaMaria lazovaHead of GSS [email protected]: +359 2 91985-463www.rbb.bg

croatiaraiffeisenbank Austria d.d.Petrinjska 5910000 ZagrebMensur hodžicHead of GSS [email protected]: +385 1 6174-327www.rba.hr

czech republicraiffeisenbank a.s.Hvezdova 1716/2b14078 Prague 4vit cermák Head of GSS Czech [email protected]: +420 234 40-1481www.rb.cz

hungaryraiffeisen Bank Zrt.Akadémia utca 61054 BudapestZsuzsanna harasztiHead of GSS [email protected]: +361 484 4362www.raiffeisen.hu

Polandraiffeisen Bank Polska S.A.(raiffeisen Polbank)Piękna 20 Str.00-549 Warsawradek ignatowiczHead of GSS [email protected]: +48 22 585-2000www.raiffeisen.pl

romaniaraiffeisen Bank S.A.246C Calea Floreasca 014476 Bucharest 1Andrei MezdreaHead of GSS [email protected]: +40 21 30612-89www.raiffeisen.ro

russiaAo raiffeisenbankSmolenskaya-Sennaya Sq. 28119020 Moscowevgenia klimovaHead of GSS [email protected]: +7-495-721 9900www.raiffeisen.ru

Serbiaraiffeisen banka a.d.Djordja Stanojevica 1611070 Novi Beogradivana novakovicHead of GSS [email protected]: +381 11 2207572www.raiffeisenbank.rs

Slovakiatatra banka, a.s.Hodžovo námestie 381106 BratislavaPeter uhrin Head of GSS [email protected] Phone: +421-2-5919 2134www.tatrabanka.sk

Sloveniaraiffeisen Banka d.d.Zagrebška cesta 762000 MariborPrimož kovacicHead of GSS [email protected]: +386 22293119www.raiffeisen.si

ukraineraiffeisen Bank Aval JSc9, Leskova Str.01011 KievBogdana yefremovaHead of GSS [email protected] Phone: +380 44 49879 32 www.aval.ua

´ ´

ˇ

ˇˇ


imprint

1) Information requirements pursuant to the Austrian E-Commerce Act

raiffeisen Bank international AG, registered office: Am Stadtpark 9, 1030 Vienna. Postal address: 1010 Vienna, POB 50Phone: +43-1-71707-0, Fax: + 43-1-71707-1715company register number: FN 122119m at the Commercial Court of ViennavAt identification number: UID ATU 57531200Austrian data Processing register: Data processing register number (DVR): 4002771S.W.i.F.t.-code: RZBA AT WW

Supervisory Authorities:As a credit institution pursuant to § 1 of the Austrian Banking Act, Raiffeisen Bank International AG is subject to supervision by the Financial Market Authority and the Austrian Central Bank. Further, Raiffeisen Bank International AG is subject to legal regulations (as amended from time to time), in particular the Austrian Banking Act (Bankwesengesetz) and the Securities Supervision Act (Wertpapieraufsichtsgesetz).

Membership: Austrian Federal Economic Chamber, Federal Bank and Insurance Sector, Raiffeisen Association

2) Statement pursuant to the Austrian Media Act

Publisher of GSS Press: Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 ViennaMedia owner of GSS Press: Zentrale Raiffeisenwerbung, Am Stadtpark 9, 1030 WienProducer: Marketing, Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Viennaeditors: Jürgen Sattler, Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Vienna

Society commitee Zentrale raiffeisenwerbung:Dr. Leodegar PRUSCHAK (Chairman), Petra WALTER (Deputy Chairman), Stephan MARENT (Deputy Chairman)

other committee members Zentrale raiffeisenwerbung:Mag. Rainer SCHNABL, Franz POSPISCHIL, Bernd NÖHRER, Mag. Maximilian EDER, Mag. Gertraud FRANK, Mag. Martin KOFLER, Markus FRIEDRICH, Katharina STÖGNER, Mag. Clemens GANTAR

Zentrale Raiffeisenwerbung is a registered society. Society purpose and activities of Zentrale Raiffeisenwerbung are (inter alia) a joint communication work (advertising and public relations).

Basic tendency of the content of GSS Press: GSS Press presents services and products of the Group Securities Services unit of Raiffeisen Bank International AG and its subsidiaries. Aiming at a professional audience, GSS Press reports about developments in the financial markets, with a particular focus on post-trade infrastructure. The publication is available free of charge.

images: Photographs and illustrations provided by Raiffeisen Bank International, Attila Szalay-Berzeviczy and the organizations featured in this issue.

disclaimer

This document has been published by Raiffeisen Bank International AG. This document is for information purposes and may not be reproduced or distributed to other persons. This document shall not be considered as financial, investment, legal or tax advice. This document constitutes neither a solicitation of an offer nor a prospectus in the sense of the Austrian Capital Market Act (KMG) or the Stock Exchange Act or any other comparable foreign law. An investment decision in respect of a security, financial product or investment must be made on the basis of an approved, published prospectus or the complete documentation for the security, financial product or investment in question, and not on the basis of this document. This document does not constitute a personal recommendation to buy or sell financial instruments in the sense of the Austrian Securities Supervision Act or any other comparable foreign law. Neither this document nor any of its components shall form the basis for any kind of contract or commitment whatsoever. This document is not a substitute for legal or tax advice or the necessary advice on the purchase or sale of a security, investment or other financial product. In respect of the sale or purchase of securities, investments or financial products, your banking advisor can provide individualised advice which is suitable for investments and financial products. This analysis is fundamentally based on generally available information and not on confidential information which the party preparing the document has obtained exclusively on the basis of his/her client relationship with a person. Unless otherwise expressly stated in this publication, the publisher deems all of the information to be reliable, but does not make any assurances regarding its accuracy and completeness. The publisher shall not have any liability for any representations (expressed or implied) regarding information contained in, or for any omissions from, this document or any other written or oral communications transmitted to the recipient in the course of its preparation. The information in this publication is current, as of the creation date of the document. It may be outdated by future developments, without the publication being changed. The data and statements contained in this document are strictly limited to the matters stated herein and shall not to be read as extending by implication to any other matter.

This document is intended for institutional investors only. Neither this document nor any part of its content may be relied upon by any other person. This document is not intended for retail/private investors. Requests resulting from this document will only be responded to, if the respective person is an institutional investor.

iMPrint & diSclAiMer

GSS Press | July 2015

Photo oF the Month by Attila Szalay-Berzeviczy XXVIII Summer Olympic Games Athens / GreeceAugust 2004

16

AttilA‘S Photo BloG

SiBoS12-15 October, Singapore

Upcoming Events

GSS Press - Raiffeisen Bank International · GSS Press | July 2015 11 July 2015 GSS Press Group...

Documents

Transcript of GSS Press - Raiffeisen Bank International · GSS Press | July 2015 11 July 2015 GSS Press Group...