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Due to the holiday season, Oxford Business Group will temporarily postpone its service of online economic briefings. Service will resume on January 8.
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A number of important IPOs and capital increases on the Bulgarian Stock Exchange (BSE) have significantly raised liquidity, as well as interest in the Exchange. In 2007, it is expected to merge with a larger partner, and at least five suitors are lining up.
BSE recently met with OMX, the Scandinavian bourse who operates in Sweden, Finland, Norway, Denmark and the former Soviet Baltic states of Estonia, Latvia and Lithuania, to discuss the opportunities for co-operation.
It has also been reported that Hellenic Exchanges Holdings, which runs the Greek spot and derivatives equity market, is interested in the acquisition of a 44% stake in the BSE. It is rumoured that executives from both exchanges will meet in early 2007.
BSE management had a similar meeting with counterparts from Germany’s Deutsche Börse on December 15. According to the local press, Deutsche Börse is considered by many to be the front runner as it offers the BSE opportunities for integration with EU exchanges and other possible “partnership formats”.
Other exchanges keeping an eye on the plans to privatise the 44% stake in the BSE held by the government, include the Vienna and Warsaw bourses.
Dariusz Marszalek , the PR officer of the Warsaw Stock Exchange reported that “There was information that we are interested in the privatisation of the Bulgarian stock exchange. Our president Ludwik Sobolewski said that we are interested”.
Marszalek said that the Warsaw Stock Exchange had not scheduled any meetings with the BSE yet, but that the Warsaw Exchange was likely to launch a bid, should the Bulgarian government proceed with privatisation.
Most brokers are in favour of a merger with a larger partner, on the grounds that it will bring increased accessibility for international traders, better technology and more sophisticated instruments. However, some have expressed doubts about certain bidders, worrying about their size, as large candidates would swamp the BSE and decrease its visibility. Meanwhile, others put into question the technology and long-term viability of potential suitors. Having said that, there is general confidence that the right decision will be made.
Timing looks good. Brokers are forecasting continued growth, particularly in the blue-chip index. According to a recent survey published in the local press, 72% of brokers polled expect the capital market to grow further, 11% foresee a lateral move, while 17% predict a downward trend by the end of the month.
Most of the growth has been driven by successful IPOs. This month, two events have been the focus of attention. One is the secondary trade of shares in battery maker MonBat and the other one is the start of trading in DVD manufacturer Media Systems.
The September 2006 Chimimport IPO of $29.89m was more than two and a half times oversubscribed, while MonBat IPO of $22.04m was more than six times oversubscribed. MonBat, who plans to use the cash raised for investment and expansion, offered 4.7m shares in a free float, which represents 24% of its capital.
DZI Group, one of Bulgaria’s most-recognised brand names and business entities, has also attracted interest on the BSE due to its sale to the Greek firm EFG Eurobank. Other recent winners have included Central Cooperative Bank, Bulgarian American Credit Bank and Bulgartabac Holdings, one of the leading tobacco companies in Central and Eastern Europe.
Significant capital increases have also attracted the attention. Fuel trader Toplivo aims at raising $6.61m in a 25% increase in its capital, while brokerage firm Fintexco plans to double its capital to $3.71m. Pharmaceutical manufacturer Sopharma has already doubled its capital to $89.06m, in one of the biggest capital market events of the year.
Meanwhile, Dimana Rankova, the deputy chairman of the Bulgarian supervision commission, told the local press that the Sofix index (which lists the dozen most traded stocks) and the BG40 (which lists the 40 most popular stocks) have been growing at an average rate of 30% in the past few years, and that the BG40 grew by 81.8% from the end of January 2004 to the end of September 2006.
