THE CAPITAL market in Slovakia is one of the weakest in central Europe, but interconnecting with other stock exchanges in the region could help to enliven trading with Slovak securities.
The Austrian Erste Bank was the first to come up with the idea of a new central European stock exchange, incorporating the stock exchanges of Vienna, Bratislava, Prague, Budapest, Warsaw, Zagreb, and Ljubljana.
Andreas Treichl, the general manager of Erste Bank, told the press that interconnection between stock exchanges would have a good chance of surviving successfully.
"It is about time we did something on this issue that makes sense," said Treichl.
By and large Slovak banks find the project of a common stock exchange in central Europe a good idea, one that could have a favourable impact on the Slovak capital market.
"At this time of world globalisation within the business environment, the only solution is to create a functioning and liquid market in central Europe, which would offer interesting opportunities to potential investors," said Silvia Nosálová, the spokeswoman of the VÚB bank, to The Slovak Spectator.
"Creating a stock exchange with higher liquidity than it currently has would be beneficial for the Slovak market," added Roman Začka, PR director of Tatra banka.
According to banks, an interconnected stock exchange would bring a common trading platform with a unified trading system and settlement.
Foreign investors would get a simpler orientation with such a market, which could increase their interest in investing in the region.
Long-term and short-term capital would be able to circulate in central Europe more easily thanks to unified capital market tools. Consequently this would mean higher liquidity for the whole market.
Bosses in Vienna, Budapest, and Warsaw stock exchanges have already expressed positive opinions over a unified central European capital market. However, no timetable or financial location has yet been discussed.
"We estimate that such a stock exchange could be established within a five year period," said Nosálová.
Yet despite the benefits to the national capital markets, the whole project would necessarily face significant risks and barriers.
Some banks envisage the main obstacles as being an unwillingness on the part of national stock exchanges to agree to procedures on actual interconnecting, and the creation of a succeeding organisation.
According to the VÚB, the central European market is not so large that it would profitably support several stock exchanges with the same listed securities.
This would lead to problems for some of them and maybe to their downfall. On the other hand, the umbrella stock exchange would become the region's leader.
"Trading systems encounter significant risks as well. Currently, each stock exchange in Europe uses its own system in which shareholders invest great amounts of money.
"That is why an agreement [to unify the systems] to create one that would be profitable in the future will be a difficult task," explained Nosálová.
Furthermore, the different currencies circulating in central European countries bring other problems.
Potential investors would have to open accounts in all the national currencies and run the risk of suffering losses in currency transactions.
13. Sep 2004 at 0:00 | Marta Ďurianová