Deputies in the Slovak Parliament reversed themselves and wiped out changes made a month before to the Securites Act that both market organizers and analysts said would have severly depressed interest in and stymied the liquidity of the country's public markets.
The December 10 vote incorporated suggestions made by President Michal Kováč in vetoing the amendment. Those recommendations were that joint stock companies with publicly traded shares will not be allowed to convert them into non-publicly tradable shares and that securities be traded only on the bourse.
In a floor debate prior to the vote, economic experts from the opposition parties in Parliament explained how the measure would negatively impact Slovakia's capital market and the country's economic progress if the President's suggestions were ignored.
"It would create space to manipulate market rates and to avoid paying taxes," said Ivan Rosival from the Democratic Union (DU).
Rosival added that if the law were not changed, foreign investors would ignore the market altogether and that it would cause "problems with Slovakia's membership in the Organization for Economic Cooperation and Development," an exclusive global economic club to which Slovakia has been seeking membership.
In a short break after the vote, a smiling and content Viliam Vaškovič from the DU said "the heavy lobbying helped" convince other MPs to change the amendment.
"Wait a minute. It was not lobbying, but a series of professional lectures," countered Miroslav Pacola from the Association of Slovak Workers (ZRS), one of the three parties that make up the ruling coalition.
Expert reactions
Market analysts also seemed content that deputies changed the amendment back to its original form.
"The passage [of the latest amendment] is very positive," said Juraj Chren, a market analyst at Creditanstalt in Bratislava. "Otherwise, the legislation would have had a catastrophic impact [on the market]. Foreign investors simply would have turned away from us."
"We now expect general increase in share prices and trading volumes as one result, [of the changes made to the amendment]," said Martin Barto, a market analyst at ING Baring Securities in Bratislava. "The first two days [of trading on the exchange] after Parliament's decision already has brought an increase in trading volumes and blue chip prices."
Further analyzing the new measure, Barto said the only change brought into legal force is that a joint stock company will be allowed to issue non-publicly traded physical scrip. This means that shares already traded on the stock exchange will not be delisted, Barto said. However, the owners - which could be small, newly-established joint stock companies - will not publicly swap their securities, thereby limiting information about the real ownership structure of these firms.
"Regardless, other factors which caused the decline in the Slovak equity market such as a lack of protection for minority shareholders, murky privatization decisions and devaluation concerns remain," Barto added.
Misunderstanding
The ZRS's Pacola conceded that he failed to grasp the measure's impact the first time around. "But you have to understand," the ZRS deputy explained, "we approve way too many bills." Vaškovič agreed. "This easily could have happened in a Western parliament as well," he said.
The deputy who spearheaded the amendment's passage in November, Jozef Straňák from the Movement for a Democratic Slovakia (HZDS), now sought to distance himself from the bill, saying that he did not draft it but "lawyers" did.
Asked what the intention was behind the original measure, Straňák replied, "We wanted to create a super capital market and end up ahead of the market situation in Europe. The original idea was to put the capital market at the level of the country's development."
Another HZDS deputy, Miroslav Maxon, said the change reflected that coalition and opposition parties can work together when "it is good for both sides."
