Quality IPOs Desperately Needed to Enliven Bulgaria Market - Expert

Finance | April 4, 2011, Monday // 20:33|  views

Kamen Kolchev, Chairman of the Board of Directors of Elana financial holding. Photo by Sofia Photo Agency

Bulgaria's government should launch high-quality initial public offerings to bring back to life the capital market, dented now by low liquidity and lack of quality stock, according to experts.

"The Bulgarian public offerings market will not hold out big potential for major improvement in the short tem unless a few high-qualities IPOs are listed," Kamen Kolchev, Chairman of the Board of Directors of Elana financial holding, said on Monday at the "Banks Investments Money" forum, one of Bulgaria's top finance events.

"The Bulgarian state can play a crucial role by listing energy and other state-owned companies on the Stock Exchange," he added, recalling the offering of a 35% of Bulgarian Telecommunications Company AD (BTC) to the public through an IPO procedure at the beginning of 2005.

According to him such a move will lift the country's bourse to much higher levels of liquidity by bringing back the investors, while the indices will naturally adjust themselves after that.

"The market will manage to recover without state aid, but much, much slower."

Kolchev attributed the sorry performance of the capital market at the moment to the fact that the foreign investors withdrew their IPOs once the crisis set in, but, more troublingly, still do not seem interested in coming back.

"We don't see them coming back and I don't expect to see them back in the next six or twelve months – we are not even on their map. And without them the market will not recover quickly even though we are witnessing some kind of growth, but this is not what we are dreaming of," he said.

Kolchev, one of the experts who predicted the slump on the capital market in 2007, said he was harshly criticized for his words back then.

"Bulgaria's market shrank by 80% and this was not a unique case, but unlike the other markets, Bulgaria's is not recovering. This just comes to show that, obviously, we have not done our homework," he said.

The crisis taught many Bulgarian financial experts a precious lesson – not to rely on the local market alone, Kolchev said.

"Many colleagues started targeting foreign markets, which allows them to survive and gives clients a much wider choice."

The government has recently promised to present a plan for the development of the Bulgarian capital market in the next two years.

The sale of the minority stakes in the electricity distributors on the stock exchange have been said to be a must-do task in 2011.

The privatization tender, through which Bulgaria sought to boost public revenues by some BGN 80 M, managed to sell state stakes in only eight companies on Sofia stock exchange at the end of last year.

This was the first attempt at privatization for the center-right government of Boyko Borisov since the beginning of its term last summer.

The package included twenty nine state companies, the most attractive of them being Montazhi Sofia, which deals with technological equipment, steel constructions, electric installations, industrial pipelines, reservoirs.

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Tags: Boyko Borisov, BTC, Telecommunications Company, initial, government, capital, market, public offerings, ELANA, IPOs, Banks Investments Money, energy, state-owned, Kamen, Kolchev, Bulgaria, Bulgarian


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